Tariffs placed on the EU by US president Donald Trump would lead to a reduction of German exports to the US by less than 3%, new data from the ifo Institute has claimed.
A simulation model developed by the ifo Institute examined the impact of increasing US tariffs on imports to match the tariffs imposed by trading partners on American products. It suggested that if the EU held back from introducing countermeasures, the decline in German exports would be estimated at 2.4%.
“Potentially, over half of all German exports to the United States are affected,” commented ifo trade expert Lisandra Flach.
According to the Institute, the average tariff gap between the US and the EU is approximately 0.5 percentage points.
Tariff policy
Regardless of the economic effects, however, Flach added that the US tariff policy represents a significant shift in global trade relations, and is ‘highly problematic’.
“The planned tariffs increase marks a turning point and is a frontal attack on the rules-based global economic order,” she said. “In practice, it undermines almost 80 years of multilateralism.”
A positive outcome?
According to the Institute’s simulation, if the EU were able to negotiate a reduction in reciprocal tariffs equally on both sides, it would have positive effects.
“Should the EU negotiate fully reciprocal tariffs with the US, and Trump agreed to reduce tariffs accordingly, German value added would increase,” Flach added. “Our findings underscore the important role of negotiations in averting the detrimental effects of a trade war.”
The calculations is based on the ifo trade model, which evaluates tariffs and non-tariff barriers in over 141 countries and 65 economic sectors, covering more than 90% of global economic activity. Read more here.
Read more: EU efforts to counter US tariffs could be ‘complicated’, says ING
