The economic effects of the new US tariffs on steel and aluminum are expected to be limited for Germany, according to economists at the Kiel Institute for the World Economy (IfW).
According to calculations by the IfW, the tariffs will only reduce Germany’s real gross domestic product in the short term by about 0.03 percent, which is a decline of around 1.22 billion euros in economic output. “The overall economic effects for Germany and the EU are manageable” said Julian Hinz, a trade economist at the IfW and a professor of international economics at the University of Bielefeld, in an interview with the Handelsblatt. The damage to the EU as a whole is estimated to be around 0.02 percent.
Other countries, however, are expected to be more severely affected. Canada, for example, will see its real GDP decline by 0.39 percent, a much more significant impact than Germany’s. Mexico’s decline is estimated to be around 0.18 percent, due to the fact that these countries export more steel and aluminum to the US. China’s losses are expected to be negligible and the US itself will suffer a decline of around 0.04 percent.
US President Donald Trump announced new tariffs on steel and aluminum imports, ranging from 25 percent, on Monday, with the new measures set to take effect on March 4. The EU has announced plans to retaliate with its own tariffs, but details are still unknown, making it impossible to calculate the effects at this point. “A European Union reaction will, of course, aim to create economic and political costs in the US, while keeping them low within the EU” Hinz explained.