A significant downturn in German exports to the United States has become starkly apparent following the implementation of US tariffs this year, according to a newly released analysis by the Institute for Economic Research (IW). Data reveals a near eight percent drop in German US exports during the first three quarters of the year compared to 2023. This downturn reverses a positive trend; between 2016 and 2024, exports across the Atlantic had consistently risen by an average of five percent annually, pushing figures below those recorded in 2022.
The decline is heavily concentrated within core German industries. Approximately 70% of the export contraction is attributable to the automotive, chemical and mechanical engineering sectors. The automotive industry has borne a particularly heavy blow, experiencing a roughly 15% decrease in exports of vehicles and automotive parts. The mechanical and chemical industries also saw substantial declines, each registering a decrease of almost ten percent.
The steep tariffs imposed on steel and aluminum – currently standing at 50% – appear to be a primary driver behind the contraction in mechanical engineering exports. While the chemical industry’s struggles are likely multi-faceted, the IW analysis suggests that increased energy prices and the subsequent impact on German production are contributing factors, effectively curtailing export volumes.
The prospect of US President Trump’s tariff measures was anticipated earlier in the year, which triggered certain anticipatory responses within German businesses. Metall exports, for instance, registered an overall increase of nearly 15% in the first three quarters, primarily driven by a surge in the initial quarter. This uptick was swiftly followed by a decline after the March announcement of US tariffs on steel and aluminum. Pharmaceutical exports managed a modest increase of 1.2% during the same period, reflecting market volatility and the brief threat of tariffs reaching up to 100% before a temporary resolution between the EU and the US in July allowed for duty-free trade. The industry, historically, has seen average annual export growth of nearly ten percent between 2016 and 2024.
The current situation raises critical questions regarding the fragility of transatlantic trade and the potential for further disruption. The data highlights the dependence of key German industries on the US market and exposes a vulnerability amplified by protectionist trade policies. Furthermore, it underscores the challenge of maintaining export growth amidst rising energy costs and geopolitical uncertainty, requiring a reevaluation of German industrial strategy and diversification efforts to mitigate the impact of future trade barriers.