A stark geographical disparity in the economic impact of US tariffs on European goods is emerging, according to a new study released Monday by the Ifo Institute. The research, analyzing the effects of the 15% tariffs at the district and independent city level, reveals a troubling divergence in regional prosperity, sparking debate about the long-term structural shifts within the German economy.
Marcel Thum, head of the Ifo Institute’s Dresden branch, highlighted the pronounced North-South divide. While districts like Potsdam are experiencing a marginal economic boost, industrial hubs – critical to the German economy – are facing potentially significant losses. The study paints a picture of a two-tiered system where the benefits of trade protectionism are not evenly distributed.
The most substantial losses in value-added are concentrated in regions heavily reliant on manufacturing, particularly the automotive and metal industries. Salzgitter, Dingolfing-Landau, Wolfsburg, Böblingen and Ingolstadt are facing the most severe repercussions, with potential value-added losses exceeding 1%. This suggests a disproportionate vulnerability within these areas, raising concerns about job security and regional development.
Conversely, Potsdam, the Main-Taunus district, Cottbus and Bonn are witnessing slight positive effects, primarily attributed to the relative resilience of service sectors. Robert Lehmann, also from the Dresden branch of the Ifo Institute, emphasizes that this differentiation is intrinsically linked to local economic structures. The data strongly indicates that while service providers may capitalize on shifting market dynamics, the impact on manufacturing is demonstrably negative.
The Ifo Institute’s findings are prompting discussions about a potential long-term realignment of the German economy. The shift towards greater reliance on the service sector, while indicating adaptability, also raises questions about the future of Germany’s traditional industrial heartlands. The uneven distribution of tariff impact risks exacerbating regional inequalities, potentially straining social cohesion and demanding proactive government intervention to mitigate the negative consequences for vulnerable industrial regions and support workforce transitions. The study reinforces the critical need for a comprehensive strategy addressing the complexities of trade protectionism and its impact on regional economic stability.