Following the presidential election in the USA, the ifo Institute assumes that Donald Trump's economic policy will pose considerable problems for Germany and the European Union. The German Engineering Federation VDMA also fears a noticeable strain on transatlantic trade and investment relations.
„Trump is pursuing a distinctly protectionist agenda that is based on higher import duties and greater restrictions on international trade especially towards China and potentially also towards Europe,“ says ifo President Clemens Fuest and recommends taking precautions.
German exporters, for whom the USA is the largest sales market outside the EU, must expect significant losses if Trump makes good on his threat to impose basic tariffs of 20 per cent on US imports from the EU and 60 per cent on imports from China. These measures by the re-elected US president would in Germany alone caused considerable economic damage totalling 33 billion euros This could mean a decline in exports. The ifo Institute estimates that German exports to the USA could fall by around 15 per cent as a result. In addition, exports to China would fall by 10 per cent because China's exports to the USA would drop massively.
„We must prepare ourselves for the fact that the USA is moving further away from open, global cooperation. Germany and the EU must now strengthen their position through their own measures. This includes deeper integration of the EU services market and credible retaliatory measures against the US.“
Lisandra Flach, Head of the ifo Centre for International Economics
For example, the anti-coercion instrument newly created by the EU could be utilised. In addition to tariffs, it provides for further countermeasures in the event of economic coercion. Germany and the EU could also Strengthen cooperation with individual US states.
Take customs announcements seriously
Donald Trump's second term in office will be a greater challenge for German and European industry than his first presidency, commented VDMA Managing Director Thilo Brodtmann. „We have to take his tariff announcements seriously in particular. This will further noticeably burden transatlantic trade and investment relations. The USA will continue to pursue its trade policy with a focus on national security and protecting its own industrial jobs. The strategic competition between the USA and China will continue to intensify. Europe and Germany are all the more challenged, own economic strength to develop.“
„However, the USA is and will remain the most important export market outside the EU for mechanical and plant engineering from Germany. Our companies offer the products required to implement the re-industrialisation of the USA that Donald Trump is striving for. The VDMA's overall outlook for the American market therefore remains positive.“
Thilo Brodtmann, VDMA Managing Director
„Our industry grew strongly in the US market during the first Trump presidency. We believe that we are also well positioned under a second Trump presidency,“ said Mr Trump. VDMA President Bertram Kawlath. The USA would continue to try to re-industrialise, „and We want to and can play a constructive role in this process. We hope that Donald Trump will abandon his plans to impose significant tariffs on imports. This would throw another big spanner in the works of our export-orientated industry. We don't need that at all in the current tense economic situation,“ analysed the VDMA President.
Need for reform in EU policy
At the same time, the VDMA President emphasised that German policy must always include the goal of strengthening Europe must have. „If we don't succeed in strengthening the EU and at the same time to jump over our national shadows again and again, we will not survive the tough global competition,“ warned Kawlath. There is also a considerable need for reform in the EU in order to strengthen the internal market and competitiveness. with a view to strengthening the economic powers of the USA and China. The VDMA recently published a Discussion paper has outlined very specific measures on how the EU can become more competitive in the long term - for example, by abandoning its overly complex regulatory plans and taking a new, more pragmatic approach.
Sources: ifo Institute / VDMA
