It has been decided: Donald J. Trump will be President of the United States of America again. In addition to the drastic consequences for the American economy, the election result also represents a turning point for many non-American business locations for which the USA is an important sales market. Last but not least, Trump’s threats to introduce base tariffs for imports from Europe or China of 20% and 60% respectively in order to attract more companies to the United States now require a rethink, according to economic experts. “We have to prepare for the fact that the USA is moving further away from open, global cooperation,” warns Lisandra Flach, head of the Ifo Center for Foreign Trade at the Ifo Institute. Gero Furchheim, President of the Federal Association of E-Commerce and Mail Order Germany (Bevh), also sees the decision as having drastic consequences for the German location: “The importance of the globalized trade order as we know it from before and as it has made Germany strong is becoming increasingly important will continue to lose importance after the election results. The only question is how radically and quickly the upheaval will continue.”
Election results could mean heavy losses
According to the Ifo Institute, significant economic damage is expected for the German economy alone: if measures are implemented by the new president, this would mean costs of 33 billion euros. According to estimates, German exports to the USA will fall by around 15%. At the same time, exports to China will fall by around 10%, as China’s exports to the USA would also be massively reduced. “Germany and the EU must now strengthen their position through their own measures. This includes deeper integration of the EU services market and credible retaliation against the USA,” continued Lisandra Flach. According to Flach, these include the anti-coercion instrument newly created by the EU, which, in addition to tariffs, provides for further countermeasures in the event of economic coercion. The Ifo Institute also recommends strengthening cooperation with individual US states.
IW warns of transatlantic trade war
The German Economic Institute (IW), on the other hand, takes a position on possible countermeasures by the EU. In the summer, a counter-strategy was drawn up in the European Union: If Trump increases tariffs, the EU counters with equivalent increases. In a simulation, the IW calculated how this transatlantic trade war would affect the German economy: Over another four-year Trump term, Germany would face a GDP loss of 127 billion euros (in constant 2020 prices). If both sides were to increase import tariffs to up to 20% as a result of a trade war, this would cost the German economy 180 billion euros. At the end of the Republican’s term in office, German GDP would be 1.5% lower.
“A transatlantic trade war is negative for both sides. “Especially for the German export industry, which is already in crisis,” says IW senior economist Thomas Obst. IW economist Samina Sultan adds: “At best, the EU’s threatened retaliation is enough to put Trump in his place. In addition, it must be clear to both partners that a partnership on equal terms strengthens the position of both vis-à-vis China.” In order to diversify, free trade agreements with South America or the Indo-Pacific region, which the EU should uphold, would come into question, according to the IW.
Tariffs cost American consumers billions of euros
In the United States, too, people are concerned about the threats to introduce tariffs. A study by the National Retail Federation (NRF) calculated costs of $46 billion to $78 billion that US consumers could face following the imposition of tariffs. For shoes in particular, this could result in additional costs of between 6.4 and 10.7 billion US dollars annually.
Currently, the shoe industry in the United States already pays $4 billion in tariffs on 2.5 billion shoes annually. According to US news media Footwearnews, 99% of shoes sold in the US are currently imported from China, Vietnam and Indonesia. While prices remained unchanged in September compared to last year, the category is expected to see price increases for the fourth consecutive year by the end of 2024, according to the latest data from the Footwear Distributors and Retailers of America (FDRA).
