Economic Impact of Massive US Tariffs
Economist Gabriel Felbermayr warns urgently of the severe economic consequences of permanent tariffs of 50 percent on EU goods by the USA. He describes such a measure as an “economic catastrophe” for Germany since it would lead to a massive drop in exports by an average of 70 to 80 percent.
Recession Threatens German Economy
Felbermayr, Director of the Austrian Institute of Economic Research (WIFO), explains that such a tariff shock could plunge the already weak German economy into another recession. Even with a strong appreciation of the US dollar against the euro, the negative impact on exports and the overall economy would remain significant.
Necessary Countermeasures by the EU
The effects would not be limited to exports: The EU would have to respond with countermeasures, which would also affect imports, potentially causing comprehensive economic damage. Felbermayr therefore urges the EU to threaten counter-tariffs and to implement them if necessary – similar to what China did during the trade dispute with the USA.
Regional Differences and Risks for Investors
A study involving Felbermayr also shows regional differences in Germany: Particularly export-dependent cities like Bremen or Leipzig would suffer greatly from such a trade war. Germany’s economic output could decline overall by about 0.2 percent; in case of escalation, individual regions could incur losses of several billion euros per year.
For investors in the German-speaking area, this means a potentially significant burden on the German export economy and related sectors and companies. An escalation of the tariff dispute poses the risk of a recession and a considerable decline in economic performance.