Consultation Conducted on Draft Directive Ensuring Worker Safety from Radiation Exposure Risks
The recent trade agreement between the US and the EU, which caps most tariffs at 15%, offers a reprieve from previously threatened rates of 25-30%. However, this concession still poses significant challenges for Germany's export-oriented industries, particularly automotive and manufacturing.
The 15% tariff on German car exports to the US is seen as having an immense negative impact by industrial representatives. This could potentially harm Germany's core export industries, with the more severe threatened tariffs being even more damaging.
German industry voices warn that these tariffs will raise costs, disrupt supply chains, and increase prices, undermining competitiveness and potentially curbing Germany's economic growth and prosperity. This aligns with concerns over a continued economic contraction in Germany through 2025 and 2026 if trade tensions are not resolved.
The German Chamber of Industry acknowledges the deal as a "painful compromise," preventing worse outcomes while accepting adverse economic consequences. Economists view the deal as asymmetric and unbalanced, locking in tariffs that elevate costs for EU exports to the US and reduce EU GDP marginally (estimated at 0.2%), with Germany as the largest EU exporter expected to be particularly affected.
While the agreement brings some predictability and possibly averts an all-out trade war, uncertainties remain due to Trump’s prior tariff threats, and the durability of the deal is questioned by economic analysts.
The machinery industry, pharmaceutical industry, chemical industry, and automotive industry are expected to be particularly hard-hit by the US tariffs. The trade dispute with the US is attributed to the slowdown in the German economy, with the economy shrinking by 0.1% in the second quarter of 2023 compared to the previous quarter.
Despite these challenges, economists suggest focusing on domestic economic growth due to potential closure of world markets. The Eurozone's economic performance increased by 0.1% in the second quarter of 2023, but other European countries such as France and Spain are performing better economically compared to Germany. Concrete orders, such as to the construction industry, are slow to materialize, delaying a boost for the economy.
In summary, German export-oriented industries face higher tariffs, resulting in costlier US market access, supply chain disruptions, and potential declines in growth, employment, and competitiveness. The impacts are already being felt against a backdrop of an economy at risk of contraction, highlighting significant challenges from Trump's tariff policies despite the partial tariff rollbacks in the deal.
Other industries apart from automotive and manufacturing, such as machinery, pharmaceutical, and chemical, may also experience adverse effects from increased US tariffs. This finance-related burden could potentially undermine the growth and prosperity of other businesses in Germany.
The continued economic tension with the US, and the resulting tariffs, are forecasted to cause significant challenges for various sectors, potentially leading to economic contraction in Germany through 2025 and 2026.
