Crisis in the German economy: Economist: “For some German companies, Trump is good news”

The end of the traffic light coalition and the election of Donald Trump in the USA are increasing the uncertainty for the ailing German economy. But the president of the Mannheim economic research institute ZEW, Achim Wambach, also sees opportunities for some German companies in the turbulent situation. However, the need for reform in Germany is increasing even more.

“The traffic light coalition was hardly able to act and the political uncertainty in Germany was already very high. With new elections there is a chance of a liberation,” said the President of the Leibniz Center for European Economic Research (ZEW) to the German Press Agency.

Opportunities and risks under Trump

Wambach is worried about Trump’s election. The US President-elect has announced new tariffs of 10 to 20 percent on imports from Europe. Trump even spoke of 60 percent for goods from China, so Europe would have an advantage. Nevertheless, German exports would become more expensive due to the tariffs in the USA, their most important sales market. Economists fear a trade war between the EU and the USA. This would affect important German industrial sectors, says Wambach. “The chemical and pharmaceutical industries as well as mechanical engineering export heavily to the USA.”

However, there would be opportunities for German companies that already produce in the USA. “Trump will probably not only increase tariffs, but also reduce corporate taxes. For some local German companies, Trump’s election is ‘good news’.”

Last year, companies from the pharmaceutical and chemical industries, for example, increased their investments in the USA, attracted by low energy prices and a billion-dollar subsidy program. And German carmakers have had large plants in the United States for years.

Even more pressure on Germany as a location

The election of Trump should make the USA even more attractive as a location, says Wambach. “Companies will respond to this and produce even more locally.” This is bad news for the Federal Republic. “Germany as a location runs the risk of losing production and research and thus patents even more to the USA. This is a big problem for jobs in this country.”

Germany therefore needs even more reforms, for example reducing bureaucracy. The EU must also “cast off its self-imposed shackles,” warns Wambach, with a view to complex regulations such as the EU Supply Chain Act and the General Data Protection Regulation.

However, when it comes to economic reforms in Germany, Wambach expects political standstill. There are some suggestions, such as aid for the car industry and a reform of network fees. “For this to happen, the federal government and the opposition would have to work together and develop an overall concept. It is difficult to imagine that the Gordian knot would burst now of all times.”