Trump tariffs: This is how the ex-president endangers the German economy!

Trump tariffs: This is how the ex-president endangers the German economy!

The possibility of Donald Trump being re-elected as US President has caused concern not only in the US but also in Europe. If Trump implements his announced tariff plans, the impact on the German economy could be significant. According to current studies by the Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Böckler Foundation, the German gross domestic product (GDP) is threatened with losses of over one percent in the first two years after a possible tariff increase.

Trump's planned tariffs include, among other things, a massive tariff of 60 percent on all imports from China and 10 to 20 percent on products from other countries. The first years of his presidency were already marked by trade tensions, especially with China. His Democratic challenger, Kamala Harris, is not known as a supporter of unhindered free trade, but is cautious in her tariff increases compared to Trump's plans.

Impact on the US economy

In various models, the IMK has simulated three scenarios for the possible design of trade policy under Trump and Harris. The results show that the US economy would suffer from severe growth dampening as a result of tariff increases, especially in the “Trump 2” scenario. According to forecasts, US GDP could be almost five percent lower by the end of 2028 if Trump pursues his tariff goals. This would be a significant deterioration compared to around two percent for more modest tariff increases.

One of the main reasons for these negative effects is the expected increase in consumer prices. Higher tariffs often mean that costs are passed on to consumers, which could lead to a decline in purchasing power. If inflation rises, the Federal Reserve is also likely to adopt more restrictive monetary policy, which would further negatively impact growth.

Consequences for the German economy

The situation is becoming particularly critical for Germany as German industry already has to recover from the effects of the energy price shock resulting from the Ukraine crisis. The simulated scenarios show that, in the worst case scenario, the German economy could face a GDP decline of over one percent. It is particularly important to note that these negative developments occur at a time when German industry is in a phase of stagnation.

Another market factor is fear of possible retaliation by China in response to Trump's tariffs. This could put even greater pressure on the American economy, which in turn would have a negative impact on the international trade environment and German exports.

The IMK researchers warn that a tariff shock, especially together with a stagnating industry, could exacerbate the existing problems in the German economy. To counter these risks, they recommend a proactive financial policy that includes an investment offensive.

A rapid restructuring of the infrastructure and a reform of the debt brake are seen as essential in order to counteract the potential negative effects of Trump's tariff plans sooner. The IMK notes that the need for investment in Germany is already high and that the upcoming US elections create additional urgency for political action patterns.

The analysis emphasizes the importance of being prepared for possible developments, as the interactions between US trade policy and the German economy should not be underestimated. If Trump does return to office and imposes his tariff increases, workers and consumers on both sides of the Atlantic will demand significant adjustments.

For a comprehensive look at the possible impact of Trump's tariff plans on the economy, both in the USA and Germany, the IMK study can provide more details here be retrieved.