A recent economic study, led by Austrian economist Gabriel Felbermayr, has analyzed the potential consequences of a trade war between the European Union and the United States. The research, commissioned by the Family Enterprises Foundation, suggests that a severe trade conflict would significantly impact the German economy, leading to regional disparities and a decline in economic output.
According to the study, a prolonged trade war would result in a long-term reduction of Germany’s economic output by approximately 0.2 percent, with the United States experiencing a slightly smaller impact of around 0.1 percent. In this scenario, both sides would impose high import tariffs or taxes on goods and services, causing significant welfare losses in regions of Germany heavily dependent on US exports, such as Bremen and Leipzig.
The study highlights the disparities in the effects of a trade war on different regions of Germany. For instance, the production in Hamburg and Darmstadt would decline by around four billion euros per year, while in Cologne, the losses would be closer to five billion euros. In contrast, cities like Trier, Chemnitz, or Dresden would only experience a decline in the hundreds of millions of euros.
In the event of a comprehensive trade deal, the German economy could, on the other hand, experience a growth of around 0.6 percent, with the benefits unevenly distributed across the country. Cities like Bremen, Leipzig and Freiburg, as well as certain regions in eastern Germany, could expect a significant boost, with Bremen potentially seeing a 1.2 percent increase in its economic output, more than double the national average.
The study’s authors recommend that the European Union aim to negotiate a deal with the United States that eliminates mutual trade barriers, deeming it “many times better” than the consequences of a trade war.