A potential presidency under former U.S. President Donald Trump could significantly damage Germany’s already struggling economy. Trump has proposed imposing tariffs of 10% to 20% on almost all imports and even steeper tariffs on Chinese goods, potentially leading to a trade war between the U.S. and Europe. An analysis by the German Economic Institute (IW) reveals that if the U.S. imposes a 20% tariff on EU goods and the EU retaliates, the eurozone’s GDP could drop by 1.3% in 2027 and 2028, with Germany seeing a decline of up to 1.5%.
While the impact on the U.S. GDP would be severe in the first two years (with a GDP decline of 1.3% with tariffs of 10% and 1.5% with tariffs of 20% in 2025), it would gradually lessen as reduced imports improve the U.S. trade balance. However, Germany’s reliance on trade, especially with the U.S., poses a significant threat. The IMF predicts that Germany will be the only G7 country not to experience growth for two consecutive years. Jacob Funk Kirkegaard, a senior fellow at Bruegel and Peterson Institute, indicated that Germany could not count on Chinese growth to alleviate its economic struggles if the U.S. adopts more protectionist measures.
The U.S. recently overtook China as Germany’s leading trading partner, heightening the risks if the trade war intensifies. German Economy Minister Robert Habeck emphasized that exports, which contribute significantly to Germany’s growth, are under increasing pressure.
Germany’s exports dropped 0.3% in 2023 due to global demand and geopolitical uncertainties, with a further contraction expected this year. Studies suggest that tariffs could further diminish Germany’s industrial base, with a possible 32% decrease in car exports and 35% drop in pharmaceutical exports if the U.S. imposes harsh tariffs (60% on goods from China and 20% on goods from other countries). Experts also warn that even moderate tariffs could stoke uncertainty and weaken investment and consumption.