Donald Trump's 25% auto tariff could cost Germany $18B
What's the story
US President Donald Trump has announced plans to raise tariffs on European cars and trucks to 25%. The move is expected to have a major impact on Germany's economy, with the Kiel Institute for the World Economy estimating an output loss of nearly €15 billion ($17.58 billion). This highlights the vulnerability of Germany's automotive industry to US trade policies.
Economic impact
IfW warns of substantial effects
IfW President Moritz Schularick warned "the effects would be substantial," from the tariff hike, with output losses potentially rising to around €30 billion in the long run. IfW economist Julian Hinz stressed that Germany's already sluggish growth rate would be severely impacted by this move. The institute currently expects the German economy to grow by 0.8% this year.
Wider impact
Impact on other European economies
The tariff hike is also expected to have a major impact on other European economies with strong automotive sectors, including Italy, Slovakia, and Sweden. The Kiel Institute's analysis highlights the far-reaching effects of US import tariffs on the EU's largest economy. This further emphasizes the potential economic fallout from Trump's decision beyond Germany alone.
Diplomatic stance
EU should wait and see, says German government adviser
In light of Trump's decision, Jens Suedekum, chief adviser to Germany's economy minister, has advised a cautious approach. He suggested that "the EU should simply wait and see for now," considering Trump's tendency to suspend or withdraw tariff threats. Suedekum also questioned the legal basis for the latest tariff threat and urged Trump to clarify his claims about EU non-compliance with the existing trade agreement.