US tariffs meet the most important German imported goods by car

The Announcement of the American President Donald Trump, from April 3, to collect additional tariffs of 25 percent on auto imports to the USAalerted leading economists in Germany and Austria. So IFO President Clemens Fuest said on Thursday of our editorial team: « The tariffs meet the most important export goods in Germany by car. This is a great burden on German economy. » And he warned: « There are additional dangers if there is now an escalation of the trade war. »

Fuest now suggests: “The EU Should with the USA Looking for the conversation to move the US government to withdraw the tariffs. Without a certain counter pressure, this will not work.  » Therefore, the EU had to threaten countermeasures. However, the economist advised: « However, before these countermeasures are taken, you should give time for negotiations. »

DIW President Marcel Fratzscher warns: Location does not dramatize

Compared to our editorial team reported on Thursday Diw President Marcel Fratzscher also has their say. He warned against dramatizing the situation: « The US tariffs on cars should only have a limited effect on the German economy as a whole, since they should only slightly reduce the exports of German cars. » The economist now advised EU Commission President Ursula von der Leyen: « The EU should react immediately, but also de-escalating. EU tariffs should not remain limited to US cars, but contain all categories in which there are important supporters of Donald Trumps..  »

Gabriel Felbermayr, director of the Austrian Institute for Economic Research, said in an interview with our editorial team on Thursday Trump-MAKT: « The American tariffs on cars and auto parts hit the German industry hard. They could cost 0.2 percent gross domestic product. »

Economic expert Felbermayr: The German economy is prepared

Felbermayr, who used to head the Kiel Institute for the World Economy and is one of the leading European economists, emphasized: « In the first Trump administration, the damage would have been higher. In the meantime, the German auto industry is prepared. Its exports to the USA will fall significantly, but the entire exports of cars should only shrink by half a percent. » However, this does not apply to Mexico and Canada’s economies. Felbermayr explained: « These countries will particularly suffer, with overall economic production declines between 0.6 and 1.8 percent. » The costs of the tariffs are particularly noticeable in the USA. The Austrian economist refers to calculations according to which America threatens an inflation thrust of around 1.0 percentage points – despite the adaptation of the exchange rate. Felbermayr predicted: « US car exports will also fall because the more expensive imported auto parts decrease competitiveness in international markets. »

What does the EU have to do now? Felbermayr is convinced: « The European Union should agree on a common procedure with the other attacked countries – Mexico, Canada, Japan and South Korea. » Because these countries would import few cars from the USA, but all the more digital services. The economist continued: « In this area, these countries can meet the United States most sensitive. » The threat was already in the first Trump government in the room. Felbermayr demanded: « If you want to remain credible, the threat has to be implemented now. » And he advised: « At the same time the hand should remain stretched out. Because the weakening EU economy could benefit from a deal with the USA. We do not need tariffs, neither import nor export side. »

How do the German car manufacturers have to react to the US tariffs?

Prof. Dr. Friedrich Heinemann, expert of the ZEW-Leibniz Center for European Economic Research in Mannheim, told our editorial team on Thursday: « The 25 percent tariffs of the USA on EU auto imports will hit German manufacturers hard. » And what conclusions do companies draw from it? Heinemann thinks: « In the medium term, they will move their production partly to the USA, but that is not possible overnight. » In his view, the consequences of the US tariffs will also be measurable for the German economy « . Heinemann: « This will surely reduce the German GDP growth by a few tenths of percentage points this year and next year. »

Nevertheless, in the professor’s view, the EU should not overreact: « Since Adam Smith, we know: Customs also damage the country’s consumers who impose tariffs. The US inflation will also increase noticeably. Heinemann warned: « In the USA, not only imports are currently being more expensive, but also the workers less because many people are forced to leave the country. » All of this weakness the growth potential and act inflationarily. The ZEW researcher believes: « The US Federal Reserve Fed could be forced to higher interest rates. Trump will not achieve his goal of the flowering landscapes with this policy. » According to his assessment, the prices for cars are likely to fall in Europe because the oversupply increases in this country. ” Heinemann said. In the end, despite all the rhetoric: « Those who introduce the tariffs are the stupid, and not the one who practices free trade. »