25 percent inches on imports from Mexico and Canada, 10 percent on imports from China: US President Donald Trump makes his customs threats from the election campaign – and “definitely” announces tariffs against the EU. Is there a threatening a global trade war? What is in Europe? And what do the tariffs mean for the weakening German economy and the local car companies?
Consequences for the global economy
Since China, Mexico and Canada have already announced countermeasures, what economists have been fearing for months: a spiral of tariffs and countermeasures. “Trump begins his trade war,” writes Holger Schmieding, chief economist at the private bank Berenberg. Economists expect serious economic damage not only for Canada and Mexico, but also for the battered but globally important Chinese economy.
Wolfgang Niedermark, a member of the main management at the Federal Association of German Industry (BDI), warns: “Trump’s customs policy is harmful to the growth prospects of the global economy and the USA itself.”
Europe combined closely with the USA – and combative
After the “drastic measures towards Canada and Mexico” Europe should be the next destination of Trump, Thomas Gitzel, chief economist at VP Bank, believes. “It must be assumed that acts will follow.”
A trade conflict between the United States and Europe has two economic heavyweights. Together they stand for 42 percent of global economic output, emphasizes EU foreign commissioner Kaja Kallas. “We need America and America needs us.”
At the same time, Europe is combative. Chancellor Olaf Scholz (SPD) and France President Emmanuel Macron announced European countermeasures in Brussels if the United States collected additional tariffs on EU goods.
Chancellor Olaf Scholz (SPD) warned as a strong economic area. “We will and will do that.” Luxembourg’s head of government Luc Frieden and France President Emmanuel Macron said similarly: “We are not weaker than the United States. Macron emphasized that when Europe is attacked at trading topics, one had to get respect.
Diplomats said that the European Commission led by Ursula von der Leyen had prepared a list of US products a long time ago, which in the case of new US tariffs against the EU could also be raised. During the first term of trump, the EU had reacted to new taxes on steel and aluminum products with special tariffs on Bourbon Whiskey, Harley-Davidson motorcycles and jeans.
The export nation Germany would be particularly affected by a trade conflict. The German economy, which has already shrunk for two years in a row, threatens a noticeable damper, says BDI man Niedermark. German industry is directly affected by the tariffs imposed.
Car industry is heavily committed to Mexico
German car manufacturers Mexico use as a production location and serve the US market from there. VW, Audi and BMW have their own factories in the country, Mercedes-Benz produced in a community work with Nissan and Bosch has several locations in Mexico. As a supplier, the chemical industry also depends on the car.
According to the VDA automotive association, German manufacturers and suppliers have more than 330 production locations in Mexico. In 2023, 716,000 cars of German companies were produced there. And according to the company, almost 40 percent of vehicles go to the United States at Audi.
Corporations think about relocations
At VW, there are industry circles to shift at least part of the production to the USA – be it to appease Trump. According to the “Handelsblatt”, there should also be scheduled games at Audi and Porsche to manufacture in the USA. So far, Porsche has served the US market completely from Europe. But nothing has yet been decided. Officially, VW does not comment on VW Trump’s tariffs. BMW was only smiled. Customs disabled free trade, according to the group. “Ultimately, they are to the disadvantage of customers: Because they not only make products more expensive, but also less innovative.”
Exchange socks – especially autititis
The fear of a trade war and the consequences for the car industry can also be read on the stock exchanges. The DAX promptly dropped by around two percent on Monday. Auto shares such as VW, Mercedes-Benz, BMW and Daimler Truck lost five to seven percent. Cryptocurrencies such as Bitcoin also broke. Stephen Innes fears from the SPI asset management asset manager that the turbulence grasp the stock exchanges as a whole. “The sale of the cryptocurrencies throws a long shadow on the global stock markets.”
Consequences for Germany are still low
As far as the economic consequences for Germany are concerned, economists are comparatively relaxed at the current status. “Especially German multinational companies with branches in Mexico are negatively affected by the Trump-Zöllen,” says Lisandra Flach, head of the Center for Foreign Affairs at the IFO Institute. German exports to the United States, on the other hand, could even increase because products from China, Canada and Mexico in the USA would become less competitive. “For Germany, the highest risk continues to be the next goal of the Trump tariffs.”
The consequences of the tariffs against Canada, Mexico and China are marginal for Germany, says Julian Hinz, head of the research center for trade policy at the Kiel Institute for the World Economy. However, tariffs should also come against EU products, “of course that would change again”.
Customs as a boomerang for the USA?
But economists emphasize not only for Europe, but also for the USA, emphasize economists. Since in 2023 more than 15 percent of US imports from Mexico, almost 13.7 percent from Canada and almost 14 percent came from China, almost half of the American imports will be affected by higher tariffs, writes Carsten Brzeski, chief economist at the bank Ing
Trump’s new tariffs are making a lot more goods than the tariffs in its first term, writes DZ Bank. Problems in the supply chains and significantly higher costs for companies are likely to result. And Berenberg economist Schmieding estimates that higher tariffs could drive up the level of consumer prices in the United States by around 0.6 percent by the end of the year. For comparison: In December, the inflation rate there was 2.9 percent.
“USA will lose long -term”
Trump’s tariffs would have noticeable consequences for the Americans themselves, who suffer from a drastic loss of purchasing power and also chose Trump, writes VP Bank economist Gitzel. If inflation attracts inflation because of the tariffs, the US Federal Reserve Fed must also rethink its course. “Interest cuts could be off the table.” In the long term, higher interest rates would be a burden for US companies. “As is well known, there are no winners in customs disputes, but the United States will lose in the long term.”