Foreign trade: Study: What a “customs war” with the USA would mean

According to a study, an escalation of the customs conflict with the USA would have significant negative consequences for the German economy and certain industries. In the case of a “customs war”, the pharmaceutical, automotive and mechanical engineering industry in particular would lose above average, according to the study on behalf of the family business.

“Zollchaos” ensures high uncertainty

US President Donald Trump has imposed or announced high tariffs on goods from all over the world and triggered uncertainty with several turns. Therefore, there are tensions with the EU, but also with China. The study speaks with a view to Trump of “Chaos weeks in world trade” and a high level of uncertainty. The investigation deals with different scenarios of an EU customs -political escalation with the United States under special consideration of the German family businesses. The study comes from Gabriel Felbermayr, director of the WIFO research institute in Vienna, and a team from the Kiel Institute.

“Customs War” would have drastic consequences

Various scenarios were examined. In the scenario “customs war” it was assumed that Trump introduces a flat -rate additional tariffs from 25 percent to all goods imports from the EU and that the EU responds to goods imports from the USA with additional tariffs of 25 percent. In addition, it was assumed that service imports from the USA will also be taxed. Result: As a result of such a “customs war”, German exports to the United States would collapse by almost 43 percent, all -German exports would drop by 3.2 percent and gross domestic product in Germany by 0.2 percent.

According to the study, the biggest production declines in the sectors with the greatest export dependency from the United States would exist. The pharmaceutical sector would have been the strongest with a long-term decline in production of 8.7 percent, followed by the sectors motor vehicles (-4.1 percent) and machines (-3.8 percent). Regions in which these industries are strongly represented would be disproportionately affected.

Rainer Kirchdörfer, board member of the family company Foundation, said the US used tariffs used as extortion potential. This leads to a huge uncertainty. The companies should be interested in a stable deal with the USA. “The EU should take this path courageous and clever.” According to the study, the German gross domestic product would grow by 0.6 percent in the long term in a comprehensive trade deal.