Trump’s victory offers the ultimate heavy blow to a struggling Germany

Norman Ray

World Courant

Olaf Scholz, German Chancellor, throughout a press convention on the Chancellery in Berlin, Germany, on Monday, November 4, 2024.

Krisztian Bocsi | Bloomberg | Getty Photographs

The election of Donald Trump as US president may very well be one other main blow to Germany’s struggling economic system.

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Germany narrowly and unexpectedly escaped a technical recession within the third quarter. Preliminary figures confirmed that gross home product grew by 0.2%, after a contraction of 0.3% within the earlier quarter. The print got here after the German Ministry of Financial Affairs stated in October that it now expects the nation’s economic system to shrink as a substitute of develop this yr.

Not solely is the nation’s economic system struggling to choose up the tempo, however a spread of key indicators additionally paint a bleak image. That features Germany’s composite PMIwhich rose barely in October however remained in contraction territory, based on information printed on Wednesday from S&P World and Hamburg Industrial Financial institution.

Trump’s victory may make issues worse.

“Donald Trump’s probably election victory marks the start of essentially the most tough financial second within the historical past of the Federal Republic of Germany,” Moritz Schularick, president of the Kiel Institute for the World Financial system, stated in a observe after Trump claimed victory.

“Along with the home structural disaster, the nation now faces monumental international commerce and safety coverage challenges for which we’re unprepared,” Schularick stated, including that the financial insurance policies outlined by Trump will put extra stress on development all through Europe.

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Dependence on exports

The German economic system is closely depending on exports – and Trump is about to impose tariffs and different import restrictions.

The German statistics company Destatis final month stated that the significance of the US as a buying and selling accomplice for Germany has elevated. The US has been Germany’s second-largest buying and selling accomplice after China as of 2021, however overtook Beijing within the first half of this yr.

Based on Destatis, in 2023 about 9.9% of German exports by way of worth went to the US.

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Trump has beforehand urged he may impose blanket tariffs of 10% to twenty% on nearly all imports if elected, no matter their origin.

German exporters could subsequently now undergo, the ifo financial institute stated in a observe on Wednesday.

“German exporters ought to anticipate severe losses if Trump makes good on his risk to impose base tariffs of 20 p.c on US imports from all buying and selling companions,” the report stated.

“These measures by the re-elected US president would imply important financial injury of 33 billion euros in Germany alone,” ifo added, estimating that German exports to the US may fall by round 15% consequently.

Morningstar DBRS, in the meantime, recognized the automotive and chemical sectors as two of the sectors most uncovered to potential Trump tariffs – each of which have traditionally been key pillars of German business.

Lisandra Flach, director of the ifo Middle for Worldwide Economics, stated Germany and the European Union should now take their very own measures as they anticipate the US distancing itself from international cooperation.

“Germany and the EU should now strengthen their place by means of their very own measures. These embrace deeper integration of the EU providers market and credible retaliation towards the US,” she stated.

German political response

The US elections come at a time when the German authorities is in turmoil. Chancellor Olaf Scholz stated on Wednesday When then-Finance Minister Christian Lindner was fired, the ruling coalition successfully disintegrated.

Senior German political figures, together with Scholz and Lindner, had congratulated Trump on his election on Wednesday.

Talking to journalists, Scholz stated Germany would stay a “dependable” accomplice, based on a CNBC translation.

Earlier than his resignation, Lindner had proven openness to participating with Trump, saying on X that Europe ought to “prolong a hand” to the Republican politician.

“Within the EU, NATO and in addition Berlin, we now must do our homework on financial and safety coverage extra urgently than ever,” Lindner stated.

Talking to CNBC final month, Lindner had warned that US commerce coverage may very well be an issue if Trump had been elected.

“In that case, we want diplomatic efforts to persuade everybody who enters the White Home that it isn’t in the perfect pursuits of the US to have a commerce battle with (the) European Union. We must always contemplate retaliation,” he stated on the time. .

Trump’s victory offers the ultimate heavy blow to a struggling Germany

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