Germany faces new world trade order amid triple threat from US duties

Yahoo

03-04-2025

Germany awoke to a radically transformed global trade order on Thursday, hours after US President Donald Trump's announcement of sweeping customs duties.
The United States is set to introduce blanket tariffs of at least 10% on all goods imported into the United States, and a 20% toll on imports from the European Union.
As a major exporting nation, Germany is likely to be hit hard by the tariffs, which are due to take full effect on April 9.
The country's leading stock market index, the DAX, tumbled 2.3% shortly after opening on Thursday as investors pondered the consequences for Germany's crucial automotive, pharmaceutical and industrial sectors.
Trade expert Lisandra Flach from the Munich-based ifo Institute said it was a "bitter day for the global economy" and warned that Germany - Europe's largest economy - faces a triple threat from the new US policy.
The US was Germany's leading trade partner in 2024, and the first to suffer from the additional tariffs will likely be German exports to the US. These amounted to €161 billion ($177 billion) in 2024, forming around 10% of total German exports.
Secondly, the tariffs' massive impact on the Chinese economy - which faces US duties of 54% - will likely lead to a significant drop in Beijing's purchasing power, harming German companies' prospects in the vital Chinese market.
And German goods are also likely to face massive competition from countries such as China that will be seeking new markets following their effective exclusion from the US.
Berlin can initially expect a 0.3% decline in gross domestic product (GDP), Flach said.
Scholz denounces 'attack' on global trade order
Responding to the policy shift in Berlin on Thursday, German Chancellor Olaf Scholz warned of an "attack" on the global trade order.
"The entire global economy will suffer from these ill-considered decisions - companies and consumers all over the world, including in the United States," said Scholz after a meeting with Jordan's King Abdullah II, who is in the German capital for a conference on people with disabilities.
The outgoing chancellor echoed comments from Economy Minister Robert Habeck, who earlier said that US tariff "mania" could cause "massive damage worldwide."
Habeck, who also serves as Germany's vice chancellor, said the impact of Trump's announcement could be directly compared to the Russian invasion of Ukraine and the subsequent European energy crisis.
The tariffs are the most disruptive in 90 years, and they could "set off a spiral that could drag countries into recession" with "dire consequences for many people," the minister added.
Automotive industry faces 'massive burden'
Particularly vulnerable to Trump's aggressive tariff policy are German carmakers.
US tariffs of 25% on all imports of cars went into force overnight, marking a "fundamental break in trade policy," said Hildegard Müller, president of the German Association of the Automotive Industry (VDA) trade group.
"The announced measures are also a massive burden and challenge for both companies and the global supply chains of the automotive industry," she added.
The United States is the most important export market for the German automotive industry, which produces iconic brands such as Volkswagen, Mercedes-Benz, BMW and Porsche.
According to VDA figures, almost 450,000 German-made vehicles were exported to the US in 2024.
Business leaders warn of 'open trade war' after 'American Brexit'
German business leaders reacted to the tariff announcement with shock on Thursday.
Dirk Jandura, president of the Federation of German Wholesale, Foreign Trade and Services, called the decision a "frontal assault on global trade."
"With drastic tariff increases for more than 100 trading partners, the US president is plunging the world into an open trade war with an American Brexit," Jandura said. "I assume that conflict will have a significant impact on our economic growth."
Wolfgang Niedermark from the Federation of German Industries said that the tariffs were "an unprecedented attack on the international world trade system, free trade and global supply chains."
The move "threatens our export-oriented companies and jeopardizes prosperity, stability, jobs, innovation and investment worldwide," he added.
United EU response needed
European countries must react united to stand up to the new US policy, Niedermark said.
"The EU must now strengthen its alliances with other major trading partners and should coordinate its response with them."
Similar sentiments were expressed by the outgoing chancellor, who said that the EU is still prepared to negotiate with Washington to avert the tariffs.
"We are focusing on cooperation, not confrontation," said Scholz.
Habeck emphasized that the EU will continue to seek negotiations with the Trump administration in the coming days.
"We have always pushed for negotiations, not confrontation. That remains the right approach," he stated.
If the tariffs do take effect, however, Habeck said that Germany and the European Union are ready to respond.
"We have the largest single market in the world. We must utilize this strength," the minister added.