Germany’s economy would shrink by at least 1.2 percent by 2028 if Donald Trump is re-elected president of the United States and implements his proposed increase in import tariffs. This was reported today by the German economic institute IW.
Trump’s Tariff Proposals
Trump proposes introducing a basic 10 percent tariff on all imports into the US and increasing tariffs on imports from China by 40 percentage points to 60 percent, Reuters writes. Trump led the United States from 2017 to 2021 and is now the favorite in the race for the Republican Party nomination for this year’s presidential election.
Impact on US Economy & Trade Balance
According to IW, Trump’s proposals would reduce the performance of the US economy by as much as 1.4 percent in the first years, mainly due to the negative impact of higher consumer prices and unemployment on consumer spending. However, the improvement in the state of the trade balance and the state budget should allow the economy to recover almost completely from this downturn by 2028.
According to IW, Europe, especially export-oriented states such as Germany, would feel the much harsher effects of Trump’s proposals. The institute predicts that Germany’s gross domestic product (GDP) would shrink by 1.2 percent by 2028, due to a drop in exports and a subsequent slump in private investment. The drop in GDP could be as much as 1.4 percent if China responded to Trump‘s actions with retaliatory import duties.
European Union’s Response to Trump’s Tariffs
“The European Union should now prepare for such a scenario,” IW said. “The EU should use the remaining term of US President Joe Biden to put trade relations with the US on a firmer footing,” he added. According to the institute, the European Union should also sign other free trade agreements, for example with Australia, India, Indonesia or with the South American Mercosur group, which includes, among others, Argentina and Brazil.
The institute also said that the EU should prepare a response in case Trump wins the presidential election and threatens to introduce new trade barriers. “To suppress such a threat, the EU should also be able to threaten credible retaliatory measures,” adds the German economic institute.
Source: čtk
