World trade: Bundesbank: Trump’s tariffs considerable risk for Germany

The Bundesbank again warns of serious damage to the German economy if US President Donald Trump will make his customs threats from the election campaign. A foreclosure course of the USA under Trump would particularly affect the exporting nation Germany and bring “significant risks to economic growth”, said Bundesbank President Joachim Nagel in Frankfurt.

According to model calculations, German economic output in 2027 could be almost 1.5 percentage points lower than previously predicted. “Inflation could also be used, although the extent is very insecure.” It is a hypothetical scenario, emphasized Nagel.

New tariffs under Trump are the greatest risk for the German economy, which has already shrunk for two years in a row. For this year, the federal government and leading economists expect mini growth. Already in November Nagel had warned that Trump’s customs offensive could cost Germany one percent of gross domestic product. The United States is the most important trading partner for Germany.

Does Trump come true?

In its account, the Bundesbank is based on Trump’s election campaign announcements: For imports from China, tariffs would therefore increase to 60 percent, while products from Germany and other countries would be occupied by 10 percent.

So far, the US government has implemented additional tariffs of 10 percent to Chinese goods. Customs of 25 percent on aluminum and steel were announced for March, tariffs in the same amount of Mexico and Canada are in the room. In addition, Trump recently signed an arrangement, according to which tariffs are to be raised everywhere where the United States is currently less demanding than its trading partners. He promised further customs announcements, for example with a view of cars, computer chips and pharmaceuticals.

In addition to US volumes, the Bundesbank took further announced measures such as tax reliefs and a large-scale deportation of immigrants in the United States. In addition, she assumed that trading partners react with retaliatory tariffs – as the EU announced.

Customs customs duties the USA itself

Conclusion: “The German economy would suffer significantly from such a political swivel,” said Nagel. A devaluation of the euro could strengthen the competitiveness of German exporters. But that is not enough to compensate for the negative effects.

The United States would also suffer from new tariffs, said Nagel. “Loss of purchasing power and increased costs for preliminary work weigh more than any competitive advantages for the US industry.” The inflation rate would also rise sharply. “Unlike the government announced, the consequences of tariffs for the USA should be negative.”