German Chancellor Olaf Scholz speaks at a press conference at the Chancellery in Berlin, Germany, Monday, November 4, 2024.
Christian Bossi | Bloomberg | Getty Images
The election of Donald Trump as US president could deal another major blow to Germany’s struggling economy.
Germany surprisingly narrowly escaped a technical recession in the third quarter, with preliminary data showing gross domestic product grew 0.2% after contracting 0.3% in the previous quarter. After printing german economics ministry October said the country’s economy is now expected to contract rather than grow this year.
Not only is China’s economy struggling to pick up speed, a series of key indicators are also performing poorly. This includes Germany Composite PMIIt rose slightly in October but remained in contraction territory, according to data from S&P Global and Hamburg Commerzbank on Wednesday.
A Trump victory could make things worse.
“Donald Trump’s possible electoral victory marks the most difficult economic moment in the history of the Federal Republic of Germany,” Moritz Schularik, director of the Kiel Institute for World Economics, said in a report after Trump’s announcement of victory. the beginning of.
“In addition to the structural crisis at home, the country now faces huge foreign trade and security policy challenges for which we are not ready,” Shularik said, adding that the economic policies outlined by Trump would provide support for Europe as a whole. Growing up brings additional stress.
dependence on exports
Germany’s economy relies heavily on exports, and Trump is preparing to impose tariffs and other restrictions on imports.
Destatis, the German statistics office, last month explain The importance of the United States as Germany’s trading partner has been growing. The United States has been Germany’s second-largest trading partner after China since 2021, but overtook Beijing in the first half of this year.
Some 9.9% of German exports in value terms will go to the United States in 2023, according to Destatis.
Trump has previously said that if elected, he could impose sweeping tariffs of 10% to 20% on almost all imported products, regardless of their source.
German exporters may now suffer losses, the ifo economic institute said in a report on Wednesday.
The report said: “If Trump follows through on his threat to impose a 20% basic tariff on U.S. imports from all trading partners, German exporters… will surely suffer serious losses.”
ifo added: “These measures taken by the re-elected US president will mean that Germany alone will suffer huge economic losses of 33 billion euros.” He estimated that German exports to the United States could be reduced by about 15% as a result.
Meanwhile, Morningstar DBRS sees automobiles and chemicals as the two industries most vulnerable to Trump’s potential tariffs – both of which have historically been key pillars of German industry.
Lisandra Frach, director of the ifo Center for International Economics, said Germany and the EU must now take their own measures because they need to foresee the United States moving away from global cooperation.
“Germany and the EU must now strengthen their positions through their own measures. These include deeper integration of the EU’s services market and credible retaliatory measures against the United States,” she said.
German political reaction
The U.S. election comes as the German government is in chaos. On Wednesday, German Chancellor Olaf Scholz The ruling coalition effectively split after then-Finance Minister Christian Lindner was fired.
Top German politicians, including Scholz and Lindner, congratulated Trump on Wednesday.
According to a CNBC translation, Scholz said in an interview with reporters that Germany will remain a “reliable” partner.
Before his firing, Lindner had shown an openness to engaging with Trump, saying on X that Europe should “lend a helping hand” to the Republican politician.
“In the EU, in NATO and in Berlin, we need to do our economic and security policy homework now more urgently than ever,” Lindner said.
Lindner warned in an interview with CNBC last month that U.S. trade policy could become an issue if Trump is elected.
“In this case, we need to use diplomacy to convince the people in the White House that a trade conflict with the European Union is not in the best interests of the United States. We will have to consider retaliation,” he said at the time.
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