German economy trembling ahead of possible Trump comeback

The USA is by far the largest buyer of German goods. This could change if former US President Trump returns to the White House after next year's election. Representatives from various industries are calling on the German government to make provisions for this eventuality.

There is growing concern in the German economy that Donald Trump could be re-elected as US President next year. "A second Trump term would be bad news," said Siegfried Russwurm, President of the Federation of German Industries (BDI). "A president who denies climate change and questions support for Ukraine would not only pose major problems for Europe."

It is far too early to speculate on the outcome of the election. But German industry should nevertheless prepare for possible scenarios. Polls give Trump a good chance of beating his successor and incumbent Joe Biden in the election in fall 2024. Should the Republican actually win, Foreign Trade President Dirk Jandura sees "difficult times" ahead for Germany and Europe in terms of trade policy. "Trump would very likely continue his 'America First' policy from his first term in office," said the President of the German Wholesale, Foreign Trade and Services Association (BGA). "As a result, he would once again target the EU as the supposed biggest adversary after China.

There are also fears that the USA could then withdraw further from international bodies. In the worst-case scenario, the United States could withdraw from the World Trade Organization (WTO), heralding the end of global rules-based trade. "I hope things turn out differently," said Jandura.

"Diversification of risks is always a good way2

The USA is by far the largest buyer of goods "Made in Germany": from January to October 2023, German products worth 132 billion euros went to the USA, two percent more than a year earlier. Against this backdrop, BDI President Russwurm described the latest proposals from the Trump camp as "worrying". "The idea of a ten percent tariff on all US imports would trigger a cascade of negative effects," he warned. There would be immediate countermeasures from trading partners, which would set off a spiral of protectionist measures that would also significantly increase prices for US consumers and fuel inflation in the US.

Family entrepreneurs and the German Chamber of Industry and Commerce (DIHK) are therefore calling for trade agreements to be pushed forward now. "Diversifying risks is always a good way to deal with recognizable risks," said Marie-Christine Ostermann, President of the Family Business Association. Both the current government and its predecessor had done too little to promote a successful trade policy with corresponding agreements in the EU. A smart trade policy would bring immense growth impulses through the mutual recognition of standards and the reduction of bureaucracy and tariffs. "The EU and USA should quickly agree on a raw materials agreement," said DIHK President Peter Adrian. This could reduce discrimination against European companies in the support programs of the Inflation Reduction Act (IRA) in the USA and prevent the reintroduction of reciprocal steel tariffs.

At the same time, the European Union should work hard to improve the competitiveness of its own domestic market and drive forward the diversification of supply chains. To this end, trade agreements such as those with the South American Mercosur states as well as Indonesia and India are needed quickly "in order to dismantle trade barriers there and secure trade and investments", said Adrian.

Biden partially upholds protectionism

Trump's first term in office was characterized by great uncertainty for companies on both sides of the Atlantic: with tariffs on steel and aluminum and long maintained threats to impose tariffs on car imports - which, however, were not implemented. "Even with a second term in office for Joe Biden, not all of the problems that are currently straining transatlantic economic relations would disappear," said BDI President Russwurm. Many measures from the Trump era have been continued under the current US president or have only been defused with interim solutions, but not finally resolved.

"An active trade policy, which also includes traditional market access for all companies, has not been a priority for Biden so far," said the BDI President. "It is questionable whether this would change in a second term of office." The German government did not want to respond specifically to the question of the extent to which it is preparing for a possible Trump comeback. "I simply don't want to speculate on that," said government spokesman Wolfgang Büchner on a possible victory for the Republican, who is ahead of the Democrat Biden in some polls. "And as you know, the Federal Chancellor is not overly impressed by polls," Büchner added.