Global Trade Implications of a Trump Comeback for Germany

In case Donald Trump wins the US presidential race and starts a new trade war with China, Germany as an exporting nation, would feel the consequences. If Trump follows through on his election campaign promise to impose tariffs of 60 percent on goods from China and of 20 percent on goods from all other countries, not only could German exports to the US fall by 14.9 percent, but also German exports to China would see a sharp decline, as Chinese demand for intermediate products from Germany would be adversely affected, as is shown by this simulation study by EconPol Europe and the ifo Institute. Overall, Germany’s automotive and pharmaceuticals industry would be hit hardest. However, Germany could partially offset this drop in demand by diverting exports to other countries, such as Canada or Mexico, and by increasing its exports in the services sector.