A new trade package from the US is likely to particularly affect the German industry, according to simulations by the Ifo Institute, published on Monday.
If President Trump were to impose the reciprocal tariffs of April 2, as well as 50 percent tariffs on EU imports and additional product-specific tariffs, the German industry would shrink by 2.8 percent in the medium term, the simulations suggest. German exports to the US would decline by 38.5 percent and exports to China would decrease by 4.7 percent.
The US tariffs would primarily hit the auto and pharmaceutical industries, according to the institute, with the auto industry facing potential losses of up to six percent and the pharmaceutical industry potentially incurring losses of up to nine percent. In contrast, the services sector and agriculture would be less affected, with a slight increase of 0.4 percent in the value of their production.
“If President Trump were to actually implement his tariff announcements, the direct effects on German US exports would be significant” said Andreas Baur, an Ifo trade expert. “Positive effects of a trade diversion into other markets could, however, partly offset the losses.”
The calculations are based on the assumption that Trump re-introduces the country-specific tariffs announced on April 2 and raises tariffs on EU imports to 50 percent. Additionally, product-specific tariffs of 25 percent are assumed for pharmaceutical and electronics products, steel, aluminum, cars and auto parts. Potential retaliatory tariffs from trade partners are not included in the calculations.