The German central bank has warned that the country’s economy is at risk following planned tariffs by US President, Donald Trump.
The Apex bank cautioned that as an export-focused nation, Germany would suffer “considerable risks for economic growth” if Trump follows through on his threat to impose tariffs.
President of the Bundesbank, Joachim Nagel, in Frankfurt, forecasted that German economic output in 2027 could fall by 1.5 percent as a result of the expected trade war with the US (country’s biggest trading partner).
US tariffs are considered the biggest risk for the German economy, which has struggled to recover from the coronavirus pandemic and the consequences of the Russian war in Ukraine, with the country suffering from two consecutive years of recession.
The Bundesbank estimate was based on Trump’s election campaign promises of 60% tariffs on Chinese imports and 10% for products from Germany and other countries.
In his first weeks in office, Trump introduced 10% tariffs on Chinese goods and announced 25% duties on all aluminium and steel imports, with additional duties of 25% on Mexico and Canada also in the pipeline. The Mexican and Canadian tariffs have been postponed until early March.
The bank also assumed that trading partners would react with retaliatory tariffs, as the European Union has promised to do.
Nagel said, “The German economy would suffer considerably from such a policy shift.”
A devaluation of the euro could strengthen the competitiveness of German exporters, but not sufficiently to compensate for the negative effects.
