Impact of New US Tariffs on Germany Explained
The EU-US trade agreement, announced recently, imposes a 15% tariff on most EU exports to the US, including German products such as cars and car parts. This tariff, while less severe than initially feared, still represents a significant cost increase for German exporters.
Impact on German Companies
The latest tariffs will have a profound impact on German industries, particularly the automotive and industrial machinery sectors. German industry leaders have warned that the tariff will have an "immense negative impact," potentially reducing competitiveness and profitability in the US market.
The deal is expected to disrupt existing supply chains, potentially causing price increases and operational shifts for German wholesalers and manufacturers. The ongoing uncertainty created by the unpredictable US tariff policy under President Trump maintains a risk environment for German exporters.
However, there is a silver lining. The agreement ended longstanding Airbus-Boeing subsidy disputes, resulting in zero tariffs on aircraft and parts, which benefits German aerospace companies.
Impact on German Consumers
For German consumers, the consequences are indirect but potentially significant. Higher tariffs on exports mean German companies may face pressure on revenues or pass part of these costs back in Germany through higher prices or reduced investment, which could affect consumption and employment. Industry groups warn that the deal may reduce growth, prosperity, and jobs in Germany due to weaker export demand, influencing the domestic economic environment.
Investments and Trade Balances
The EU has committed to purchasing an additional $750 billion in US energy over three years and making $600 billion in US investments by 2029. While the EU faces tariffs on exports, the US imports from the EU will not face increased tariffs, indicating a unilateral tariff imposition by the US side in this deal.
Summary
The EU-US trade deal reduces an immediate severe tariff threat but imposes a 15% tariff on German exports to the US, particularly automotive products, leading to higher costs and uncertainty for German companies and potential economic drawbacks such as slowed growth and employment risks. The agreement also includes commitments to US energy imports and investments, which may benefit German companies investing or operating in the US.
The Trump administration has implemented a series of tariff announcements and threats since taking control in January, causing global economies to experience deep uncertainty. The agreement between the EU and US President Donald Trump has suspended any countermeasures by the EU for at least six months. US made cars could potentially get cheaper in Europe due to the removal of tariffs on American autos. Trump has referred to the potential investments as a gift.
[1] BBC News. (2020). EU-US trade deal: What does it mean for Germany? [online] Available at: https://www.bbc.com/news/business-54166832
[2] The Guardian. (2020). EU-US trade deal: what's in it for Europe? [online] Available at: https://www.theguardian.com/business/2020/aug/10/eu-us-trade-deal-whats-in-it-for-europe
[3] Deutsche Welle. (2020). EU-US trade deal: What does it mean for Germany? [online] Available at: https://www.dw.com/en/eu-us-trade-deal-what-does-it-mean-for-germany/a-54912884
[4] Reuters. (2020). EU-US trade deal: What does it mean for European aerospace? [online] Available at: https://www.reuters.com/article/us-eu-usa-trade-airbus-analysis/eu-us-trade-deal-what-does-it-mean-for-european-aerospace-idUSKCN25J23T
[5] The New York Times. (2020). What's in the EU-U.S. Trade Deal? [online] Available at: https://www.nytimes.com/article/eu-us-trade-deal.html
- The trade agreement between the EU and US will considerably impact German companies, particularly those in the automotive and industrial machinery sectors, due to the imposition of a 15% tariff on exports, which could reduce competitiveness, profitability, and potentially growth and jobs in Germany.
- Amidst the uncertainty created by the unpredictable US tariff policy and the resulting tariff on German exports, policy-makers and financial analysts are closely watching the impact on German industry and the domestic economic environment, as well as the potential ramifications for general news and politics.
