Possible Impacts on the German Economy
Economic expert Gabriel Felbermayr, director of the Austrian Institute of Economic Research (WIFO), has expressed concern about the potential for permanent tariffs of 50 percent on EU goods. These measures could represent an economic disaster for Germany and lead to a massive decline in exports.
Decline in Exports
Felbermayr estimates that exports could decline by an average of 70 to 80 percent if permanent tariffs of 50 percent were imposed on EU goods. This would have significant negative impacts on the German economy, as exports are a crucial pillar of Germany’s economic performance.
EU Reaction
The EU would likely respond with countermeasures, which would in turn affect imports from the United States. This could lead to a deterioration of trade relations and further exacerbate the economic situation.
Economic Disaster
Felbermayr describes such tariffs as an “economic disaster” for Germany, as they could lead to a renewed recession. This would heavily burden not only exporters but also the entire economy and therefore significantly impact investors’ portfolios.
Comparable Scenarios
A study shows that a “trade war” with the U.S., involving flat additional tariffs of 25 percent on all goods imported from the EU, could reduce German exports to the U.S. by almost 43 percent. This scenario is less extreme than the 50 percent tariffs described by Felbermayr but highlights the potential negative impacts of trade conflicts on the German economy.
Outlook for the German Economy
Despite concerns regarding trade conflicts, Felbermayr anticipates that the German economy will stagnate in 2025 and then rise, with further improvement expected in 2026. This suggests that the German economy is capable of recovering from short-term shocks as long as no extreme trade restrictions are introduced.
In summary, Felbermayr’s warning of an 80 percent decline in exports illustrates how vulnerable the German economy is to trade conflicts. The potential impacts on exporters and investors are significant and underline the need for stable trade relations for Germany’s economic health.