A new study by the Ifo Institute has revealed a disparate economic impact of US trade policy across Germany’s federal states. The research, released Monday, highlights significant variations in how different regions are affected, depending on their industrial structures.
Marcel Thum, Managing Director of Ifo Dresden, explained that Saarland, Lower Saxony and Baden-Württemberg are experiencing the largest losses in industrial value creation. Conversely, Saxony-Anhalt and northern German states are proving to be comparatively less affected. Robert Lehmann, Ifo’s economic expert, attributed these differences to structural factors, specifically emphasizing the strong presence of the automotive industry in the more heavily impacted states.
The study analyzed three distinct scenarios: the continuation of current US trade policies, the implementation of product-specific tariffs and the potential impact of reciprocal tariffs reaching up to 50% on all imported goods – a measure previously threatened by US President Donald Trump. Under these various scenarios, states like Saarland, Lower Saxony and Baden-Württemberg could see industrial value creation shrink by between 1.7% and 3.0%.
Hamburg, a city-state with a different industrial profile, consistently emerged as the least affected region. Indeed, Hamburg could potentially benefit from product-specific tariffs under the most favorable scenario.
“Hamburg’s industrial focus, particularly in areas like other vehicle construction, including shipbuilding, could offset the negative tariff effects on other industries” noted Thum. The future course of US trade policy, following the current 90-day negotiation pause, will be critical in determining the ultimate impact on the German economy.