Even before his inauguration, Trump is stoking fears of trade conflicts. The export nation of Germany is little affected by the initial plans. But instead of breathing a sigh of relief, it’s time to make preparations.
Donald Trump isn’t even back in office yet, but he’s already keeping the (economic) world in suspense. The US President-elect has just announced that one of his first official acts after returning to the White House on January 20th will be to impose tariffs on goods from Mexico, Canada and China. Read more about this here.
Beijing is already warning of an escalation of the simmering trade conflict, and Canadian Prime Minister Justin Trudeau is trying to appease Trump with a phone call. However, no one in this country should breathe a sigh of relief just because Germany does not appear in this first customs list. Rather, Germany should understand Trump’s announcement for what it is: a warning shot.
It will affect others first. Most experts expect that consumer prices in the USA will rise due to import tariffs. This would then also stimulate inflation as long as the Fed does not take countermeasures. Calculations by the bank ING indicate additional annual costs of up to $2,400 per person. This means that Trump could achieve exactly the opposite of what he promised his voters: low prices.
But above all, a change in tariffs in the world’s largest economy is likely to have consequences far beyond the country’s borders. The tariffs on electric cars from China were already significantly increased under the incumbent US President Joe Biden. The People’s Republic then focused on Europe with its heavily subsidized vehicles and put pressure on manufacturers there. Similar effects could now occur with a whole range of products.
Furthermore, these are unlikely to be the last protectionist measures that the Republican will introduce – and not just because “tariffs” is his self-proclaimed favorite word. But rather because tariffs are one of his most popular means of pressure. With his power over market access to the USA, Trump almost always has the upper hand.
Trump will not shy away from turning the lever for Europe too. He has already threatened import duties of 20 percent in the past. That would be a bitter blow for Germany as an export nation. After all, around ten percent of German exports go to the USA. The country is the most important German export partner. To make it even clearer: Germany exports 156.2 percent more to the USA than it imports from there. Additional tariffs would make this trade more difficult.
But what does that mean now? The global economy will probably become more confusing in the coming years and the known scope for action will become narrower. It is therefore high time for Germany to protect itself elsewhere. The European internal market must be strengthened and free trade agreements with other countries must be negotiated as quickly as possible.
How might businesses in Germany adapt to the changing landscape of international trade due to rising tariffs?
Interview: Navigating the Trade Tensions with Expert Economist Dr. Sophia Lang
Editor (Time.news): Good evening, Dr. Lang, and thank you for joining us today. As we look at the international trade landscape, one of the hot topics is the potential return of tariffs on goods from Mexico, Canada, and China by President-elect Trump. What’s your initial take on this situation?
Dr. Lang: Good evening, and thank you for having me. My initial take is that this move reflects a continuation of the protectionist policies we’ve seen intensify over the last few years. Trump’s indication to impose tariffs can send shockwaves not just through the immediate countries affected but ripple out to the global economy.
Editor: Indeed, and it appears that Germany may be breathing a sigh of relief for now since it wasn’t explicitly targeted in this latest announcement. However, you’re suggesting that this shouldn’t be a cause for celebration. Can you elaborate on that?
Dr. Lang: Absolutely. While Germany isn’t on the current tariff list, it should interpret Trump’s announcements as a warning shot – a signal that the U.S. may realign its trade policies in ways that could eventually impact European nations. The interconnectedness of global trade means that tariff changes in the U.S. can lead to retaliatory measures or economic shifts that affect Germany, especially given its heavy reliance on exports.
Editor: That makes sense. The article also mentions concerns about rising consumer prices in the U.S. due to these tariffs. How might this inflation impact the broader economy?
Dr. Lang: Inflation is a major concern. When tariffs are imposed, the cost of imported goods typically rises, which translates to higher consumer prices. The scenario presented by ING, predicting an annual added cost of up to $2,400 per person, highlights a troubling trend. This could lead to lower consumer spending and dampen economic growth, effectively counteracting Trump’s promises to lower prices and stimulate the economy.
Editor: It’s quite a paradox, isn’t it? The expectation of lower prices contradicts potential inflationary outcomes. How should businesses, particularly in Germany, prepare for these uncertainties?
Dr. Lang: Businesses in Germany should adopt a proactive approach. This includes reevaluating supply chains, exploring diversified markets to mitigate risks, and staying agile to respond to changing tariff landscapes. It’s also crucial to engage with policymakers to ensure that their concerns are heard and to advocate for trade agreements that safeguard their interests.
Editor: That leads us to the geopolitical implications of these tariffs. Canada and China are already reacting, but how do you see this evolving on the global stage?
Dr. Lang: The potential for a trade war is very real. Countries like China are likely to retaliate, creating a tit-for-tat scenario that could escalate tensions not just regionally, but globally. This could hinder international cooperation and lead to a fragmented trading environment, which could have long-lasting ramifications on global supply chains and international relations.
Editor: Dr. Lang, if you could summarize your thoughts on the importance of a collaborative approach to trade, especially in light of these developments, what would that be?
Dr. Lang: Collaboration is key. Trade is most effective when it’s mutually beneficial for all parties involved. Policymakers and business leaders must work together to find common ground, foster open dialogue, and establish frameworks that promote stability rather than uncertainty. The global economy thrives on cooperation, and moving towards that should be the priority for all nations involved.
Editor: Thank you, Dr. Lang. Your insights are invaluable as we navigate these complex trade discussions. We appreciate your time.
Dr. Lang: Thank you for having me. It’s a pleasure to discuss these important issues.