Customs accord between US and EU Imperils German Exports, according to Malmendier
In an interview with RTL and ntv, Ulrike Malmendier, a member of the German Council of Economic Experts, has criticised the current US-EU trade agreement for not including services. This omission, she argues, could pose significant economic challenges for Germany.
If services are excluded from the agreement, export-oriented German industries—especially manufacturing sectors like automotive, machinery, and chemicals—face intensified economic challenges due to the imposition of significant tariffs on goods exports to the US. This could weaken their competitiveness and market position, potentially leading to increased costs for exporters, loss of competitiveness, and limited tariff pass-through.
The EU will remain subject to high tariffs, such as 15% on autos, machinery, chemicals, and 50% on steel and aluminum, when exporting to the US market. As a leading exporter, Germany, with these sectors being crucial to its economy, will bear a disproportionate share of these costs.
The tariffs, combined with a stronger euro against the US dollar, exacerbate Germany's loss of price competitiveness in the US market, reducing demand for German exports. Automotive and industrial machinery industries—important pillars of the German economy—are especially vulnerable to the 15% tariffs, making their products more expensive relative to competitors and potentially reducing export volumes.
While some cost increases might be passed to US consumers, in some cases German exporters may have to absorb costs to maintain market share, squeezing margins and reducing profitability. Furthermore, excluding services means Germany cannot leverage its strong service sector to improve trade balance or foster deeper US market integration. Since services constitute a growing part of international trade, this omission limits overall economic gains from the agreement and leaves German service providers at a disadvantage.
Malmendier warned about potential economic consequences for the German economy due to the trade agreement, mentioning a possible decrease in investments as a consequence. However, she did not address the impact of including services in the trade agreement on the European trade surplus over the US or the potential reversal of the trade balance. She also stated that there's no discussion about the possibility of imposing tariffs on services, even in the digital sector, for American investment banks.
In summary, German export-oriented industries will face higher tariffs on goods, reduced competitiveness, and lost potential benefits in the services sector if services are not included in the trade agreement. This situation risks constraining Germany's export growth and economic recovery in the near term.
The exclusion of services in the US-EU trade agreement may constrain Germany's economic recovery, given the crucial role of its service sector in international trade. The high tariffs imposed on German exports, such as automotive, machinery, and chemicals, could squeeze margins, reduce profitability, and potentially limit export volumes in the business sector.
Moreover, the absence of service sector consideration in the agreement may hinder Germany's efforts to improve its trade balance or fully integrate into the US market, potentially leading to further economic challenges in politics and general-news contexts.
