A recent report reveals that if the US were to implement reciprocal tariffs on German goods, the impact on exports to America would be minimal—falling by just 3% at most. This conclusion, drawn from a study by the ifo research institute, highlights the limited consequences such tariffs would have compared to possible retaliatory actions by the EU, which could prove more damaging economically.
The study models various scenarios, suggesting that if President Donald Trump were to raise tariffs in exact proportion to current ones on US products, German exports would dip by 2.4%. Should the EU respond with their own tariff increases, the total decrease could reach 3%. The authors note that such tariff escalations can have a profoundly negative economic impact as the EU weighs its reactions to upcoming tariffs.
Additionally, the research indicates that the effect of these reciprocal tariffs is significantly less severe compared to imposing additional flat tariffs, such as a uniform 20% across all imports or up to 60% on products from China—predicted to reduce German exports by 15%. This comparatively smaller effect is attributed to the narrow tariff gap between the US and EU, which stands at just 0.5%.
Interestingly, the economists propose that Germany could potentially gain from a full reciprocity situation where US tariffs are lowered in a corresponding manner. Meanwhile, earlier studies from IW highlight that US tariffs on neighbouring countries, such as Canada and China, could also negatively impact Germany’s GDP, possibly hindering years of economic growth. In a similar vein, research by DIW Berlin suggests that blanket tariffs from the US may lead to minor GDP declines for both the EU and Germany.
A new report indicates that reciprocal tariffs by the US would reduce German exports by only 3% at worst. A study showed that an increase in tariffs would cause a 2.4% decrease, with retaliatory measures potentially increasing this impact. The researchers emphasise the smaller effect compared to more significant tariffs and caution against potentially damaging retaliatory actions by the EU.
In conclusion, the prospective impact of reciprocal tariffs on German exports is relatively minor, summarised by an expected 3% decrease. The limitations of these tariffs are clearer when compared to more extensive blanket tariffs which promise harsher consequences. As the EU grapples with its economic strategy in response to US policies, it’s apparent that careful consideration is necessary to mitigate potential damage to Germany’s economy.
Original Source: www.euractiv.com
