Moment of fate for Germany's economy: Trump's tariffs do not help

Moment of fate for Germany's economy: Trump's tariffs do not help

When the German voters go to the urn on Sunday, the focus is on the affected economy of the country - and the promises of their reform. However, the impending import tariffs under Donald Trump will make this demanding task more difficult for the new government.

Cost of a failure

A failure would result in expensive consequences. Should the parties who are most likely to form a new government coalition, not to enliven economic growth, "you know who will win the next elections, and that would be the right-wing extremist AfD," said Carsten Brzeski, senior economist at Pan-European Bank Ing, and thus reflected the fears of large parts of the population.

The stagnating German economy

The German economy, the third largest in the world, has hardly grown since pandemic. It recorded a decline in both 2022 and 2023, which means the first consecutive annual contractions since the early 2000s. For this year, the International Monetary Fund forecasts a measly growth of only 0.3%.

a climate of change

Between around 2005 and 2019, the export -oriented economy, supported by cheap natural gas from Russia, an import -hungry China and a relatively smooth global trade environment. But the world has changed dramatically since then, and Trump's return to the White House presents the German export industry with new challenges.

The importance of economic reform

Economic reforms to stimulate growth are not only what the voters want - surveys show that the economy is one of their two main concerns - but they are also crucial for the prosperity of the current and future generations of Germany, especially the growing number of Reständlern . "A uninformed German economy is a stagnating, aging and sclerotic economy," emphasized Kirkegaard to CNN.

weaknesses in the export industry

export has long been an essential driver of German growth. In 2023, exports of goods and services accounted for more than 43% of the gross domestic product - the highest proportion among the large economies, according to the World Bank .

challenges by China

The German auto industry has "suffered from its own success in recent years," explained Kirkegaard. Brands such as BMW, Mercedes and Audi, which found their success in fossil fuel technology, were "not ready to cannibalize their own success and invest a lot of money in the development of electric vehicles". Chinese manufacturers of electric vehicles, including BYD and Xpeng, have now won significant market shares from Western competitors.

The energy crisis and its effects

At the same time, the energy -intensive German industrial companies have been paying more for natural gas since Russia's invasion into Ukraine in 2022. This has caused many German companies to reduce or even close production. "We are in the middle of a de-industrialization process," said Lars Kroemer, chief economist of total metal, an association of employers in the metal and electrical industry.

Trump's threatening tariffs

Trump has been threatening imported goods to the United States with higher tariffs for months. Since taking office in January, he has proven that he is willing to have acts followed by, for example, Aluminum imports announced that is supposed to come into force in March.

consequences for the German export industry

If foreign manufacturers pass on the new tariffs to their American customers, their products could lose competitiveness compared to goods produced in the USA. This would hit German exporters hard because the United States is its largest market that makes up 10% of all exports from Germany, so the official statistics .

The future of the German economy

The task of boosting Germany in the coming years and beyond will require much more than just finding ways to deal with Trump's tariffs. The country's entire business strategy could need fundamental change. If Germany, according to Böhmer, does not take place in the next ten years the change of "outdated" industries such as car, mechanical and steel production towards a "future-oriented economy" with technologies such as artificial intelligence, it will "certainly no longer be the third largest economy in the world".

Maisie Linford and Sophie Tanno reported.