Economists Warn of Catastrophic Consequences for Germany and EU in the Event of 50% Tariffs on EU Goods
Economists have expressed grave concerns over the potential consequences of the United States imposing a 50% tariff on goods from the European Union. According to Gabriel Felbermayr, the director of the Austrian Institute for Economic Research, such a move would be a “economic catastrophe” for Germany, leading to a recession and a massive decline in exports.
Felbermayr estimates that the export of goods from Germany to the EU would decrease by 70 to 80 percent in the long term, with the EU likely to retaliate with its own tariffs, affecting imports as well. Even a strong appreciation of the US dollar against the euro, which is deemed unlikely, would not mitigate the economic damage, Felbermayr added.
The expert urged the EU to threaten countermeasures and be prepared to implement them, citing the example of China, where a similar strategy led to a decline in US tariffs. Felbermayr warned that a 50% tariff is unprecedented and would cause significant harm to the US economy as well, making it unlikely for the US to sustain such a policy in the long term.
Clemens Fuest, the president of the Munich Ifo Institute, shares similar concerns, predicting a massive decline in German exports if the US imposes a 50% tariff. He estimates that the decline could be as high as 4 percent per year, equivalent to a loss of around 60 billion euros.
Fuest fears that a significant portion of German export businesses in the US would become unprofitable, leading to a halt in deliveries. He estimates that around 10 percent of German exports go to the US and if half of those were to disappear, a portion would shift to other markets, but the overall export decline could be around 3 to 4 percent.