US “Reciprocal” Tariffs and the Erosion of Global Trade Rules: Implications for Germany
Key Messages
- The average tariff gap for traded products between the US and the EU is around 0.5 percentage points, which is relatively low compared to other US trade partners.
- US tariff changes aimed at closing the tariff gap between the US and the EU could affect 53% of German exports to the US and 6% of German global exports. While a wide range of products would be affected, the tariff increase would remain relatively small for three quarters of traded products, as their tariff gaps are below 2.3 percentage points.
- Our simulations show that higher US “reciprocal” tariffs reduce German exports to the US between 2.4% and 3.0% and decrease value added by 0.02%. These small effects for Germany, compared to scenarios with a flat 20% increase in US tariffs, are mostly due to the relatively low tariff gap between the US and the EU.
- However, the opposite scenario arises if the EU negotiates “full reciprocal tariffs” with the US – implying that the US also lowers tariffs when its own are higher. In this case, German value added and welfare increase.
US President Donald Trump proposed implementing “reciprocal tariffs”, under which the US would raise import tariffs to match those imposed by its trading partners, further undermining the multilateral rules-based system. This policy brief examines the status quo of tariff differentials between the US and the EU and explores the implications of this policy for the German economy should it be implemented. The results indicate negative effects on both German exports and value added if "reciprocal" tariffs are introduced and/or if trading partners retaliate. German exports to the US fall by 2.4% to 3.0%. These relatively small effects for Germany compared to a scenario with an across-the-board 20% increase in US tariffs on all trading partners are mainly due to the relatively small tariff gap between the US and the EU compared to the larger gaps between the US and other trading partners.
Lisandra Flach and Lisa Scheckenhofer: "US “Reciprocal” Tariffs and the Erosion of Global Trade Rules: Implications for Germany," EconPol Policy Brief 71, April 2025.