U.S.-EU trade agreement is warmly received by German Chancellor Merz
In a recent development, the United States has imposed a 15% duty on German car exports, while maintaining a 50% tariff on steel imports, as part of a new tariff agreement with the European Union. This move, although a slight easing from the previously threatened 25% on cars and 100% on steel, has caused a significant, yet so far moderate, decline in German exports to the US.
The BDI federation of industrial groups in Germany has stated that the agreement would have "considerable negative repercussions." The BGA exporters association views the agreement as a "painful compromise" and an "existential threat" for many companies. Germany's chemical and machinery industries, heavily dependent on exports to the United States, face increased costs and competitive disadvantages under these tariffs.
German carmakers, chemical producers, and machinery manufacturers are particularly affected by the 15% tariff on car exports, with industry representatives warning of an "immense negative impact" on Germany’s export-oriented economy, which depends heavily on the US market. Chemicals and industrial machinery, with sizable US exposure, face similar tariff-induced disruptions, which may raise prices and force supply chain adjustments, threatening growth, employment, and investment in these sectors.
Small- and medium-sized enterprises (SMEs), such as specialized German manufacturers of innovative products, are especially vulnerable due to tight margins and limited ability to absorb costs. They worry about planning difficulties and maintaining competitiveness under these tariffs.
However, recent economic data suggest that the adverse impact on German industrial activity has remained moderate so far. This is partly due to resilient demand elsewhere, supportive fiscal and monetary conditions in Europe, and adaptability of German firms through innovation and market diversification.
The Chancellor has expressed his "full support" for the European Commission for the negotiations that will now begin. He adds that they will now assess the outcome of the negotiations and its impact on the economy and employment in Germany. The VCI, Germany's chemical trade association, has expressed that the agreement left rates "too high."
The United States remains Germany's main trading partner. Despite the challenges, German Finance Minister Lars Klingbeil considers the agreement a "good thing as a first step." However, Clemens Faust, head of the IFO economic institute, considers the agreement a "humiliation for the EU that reflects the imbalance in power."
It is important to note that the impact of US tariffs varies across the European Union. The agreement imposes 15-percent tariffs on most exports from the European bloc. As negotiations continue, the future of trade relations between the US and EU remains uncertain, with doubts remaining about the long-term stability of the tariff regime and trade relations under the current US administration.
- The chemical and machinery industries in Germany, heavily dependent on exports to the United States, face increased costs and competitive disadvantages due to the 15% tariff on car exports and the overall tariff agreement between the US and EU.
- German Finance Minister Lars Klingbeil, despite the challenges, considers the current tariff agreement as a "good thing as a first step," while Clemens Faust, head of the IFO economic institute, views it as a "humiliation for the EU that reflects the imbalance in power."
- The BGA exporters association in Germany sees the 15% tariff on car exports, along with the overall agreement, as an "existential threat" for many companies, particularly small- and medium-sized enterprises (SMEs).
