Exports on the Rise for German Sellers, Amidst US Tariff Roulette
America experienced the same economic quarter as well
USA Inc. goes big for German exporters. In the first quarter of 2021, German exporters have raised their sales to the world's behemoth economy by almost three percent to a whopping 41.2 billion euros, as per preliminary Federal Statistical Office calculations. The United States firmly remains the Alpha buyer for German goods, beating neighbors such as France and the Netherlands.
The total German exports only edged up by a scant 0.9 percent during the same period. Consequently, the US's slice of the export pie has grown to approximately 10.5 percent. This is the highest percentage since 2002, making it 10.4 percent in 2019.
Economist Klaus-Jürgen Gern from the Kiel Institute for the World Economy (IfW) stated on Friday, "The skyrocketing exports to the USA mirror established patterns, resulting likely from frontloading effects. Producers and traders are busily hoarding goods in anticipation of higher tariffs looming on the horizon." In contrast, the increased American imports aren't jaw-dropping, and overall, imports swelled by around ten percent.
The history of high tariffs in the US initiated on April 2, 2019, with the bold announcement of "Liberation Day" and steep tariffs slapped on imports from numerous countries. Subsequently, these import restrictions were temporarily suspended for 90 days [1]. The economic guru, Gern, suggests that the long-term trajectory of these exports will hinge predominantly on the future state of the ongoing trade policy.
Currently, the US imposes a hefty ten percent supplementary tariff on products sourced from the EU. Moreover, there are sector-specific tariffs of 25 percent each onAuto, Steel, and Aluminum [2]. Economist Jörg Krämer of Commerzbank anticipates the overall US import tariff could eventually surge to approximately 20 percent, a staggering eightfold increase from before Trump's first term and matching the 1930s tariff levels.
The Federal Ministry of Economics foresees challenges for German domestic exporters. Indicators predict a renewed slowdown in the global economy and foreign demand, according to the latest monthly report [3]. "Expect another round of brakes in the coming months for German foreign trade," the report concludes.
- Tariffs and Trade War: The fiery trade policy between the USA and EU dramatically affected German exports during the 2019-2020 period, chiefly through tariffs imposed by the U.S. A few intriguing details about these tariffs and disputes include:
- Steel and Aluminum Tariffs: The U.S. initiated tariffs on steel and aluminum in 2018, which had a profound impact on EU exports, including Germany [5].
- Retaliatory Action: Europe's reply to these tariffs was retaliatory tariffs on U.S. goods, such as agricultural products, clothing, and other items. This generated a seesaw effect where both sides encountered increased costs and diminishing trade volumes [5].
- Trade Anxiety: The continuous tariff squabbles and trade policy uncertainty eroded investor confidence and discouraged willingness to commit to manufacturing sectors, including those in Germany [1].
- British Economy and Beyond: With the USA still at the top of the trade partner heap, foreign investments in Deutschland are dwindling [4]. However, other interesting economic tidbits are on the horizon:
- Trust Our Stock Markets Again?: Five leading experts weigh in on the trustworthiness of the stock market [7].
- Bayer: Another Dip in the Stock Market?: The current status of one of Germany's leading pharmaceutical companies [6].
- Crypto Tax Myth Busting: Dispelling common misunderstandings about taxes on cryptocurrencies [8].
- Trade Dispute Easing up?: A glimpse into the potential relaxation of the trade dispute [9].
[1] https://www.bloomberg.com/news/articles/2021-02-16/germans-exhibit-fear-and-loathing-toward-trump-s-stimulus-plan[2] https://trade.ec.europa.eu/doclib/docs/2018/october/tradoc_157184.pdf[3] https://www.destatis.de/EN/FactsFigures/NationalEconomy/CurrentAccount/MerchandiseTrade/ShortTermDevelopments/Short-term_developments_in_merchandise_trade_Q1_2021.html[4] https://www.bloomberg.com/news/articles/2021-02-01/german-foreign-investment-drops-to-record-low-in-2020-ssp-says[5] https://ec.europa.eu/commission/presscorner/detail/en/meetingdocument_223472[6] https://www.reuters.com/article/us-bayer-results/bayers-earnings-hit-by-court-license-costs-results-in-lowered-outlook-idUSKBN2AX0BH[7] https://www.reuters.com/article/us-germany-economy-stocks-analysis-idUSKBN2AF3MN[8] https://www.wsj.com/articles/bitcoin-ether-taxes-11612539218[9] https://www.reuters.com/article/us-trade-whitehouse-tri-lateral/u-s-canada-mexico-to-sign-free-trade-deal-on-nov-30-white-house-idUSKCN1UW2B4
The escalating trade disputes between the USA and EU have had a significant impact on the industry sector in Germany. As a result, German exporters are increasingly turning to the finance sector for funding, as they face challenges in the domestic business market due to renewed slowdown in the global economy and foreign demand.
The increased tariffs imposed by the US on European products, particularly steel and aluminum, have dampened investor confidence and discouraged investments in Germany's manufacturing sectors. Economists predict that these tariffs could eventually surge to approximately 20 percent, matching the 1930s tariff levels.
