“If America becomes protectionist, it will collapse.”

Donald Trump’s election victory in the US is the culmination of the ‘perfect storm’ that has been hitting the German economy since the pandemic. Although the trade policy of aggressive tariffs that the next tenant of the White House intends to implement is causing concern in all corners of the world, and certainly in Europe, Germany is a big weak pointThe traditional European export machine has already been suffering in recent times and Trump’s apparitions threaten a shock that would compound both economic (flat growth since Covid and continued brushes with the tech recession) and political (weak government tripartite). It has been blown up under the leadership of the Social Democrats) which is passing through the country, which the international financial press has dubbed – as it was 20 years ago – the ‘sick man’ of Europe.

Everything seems to have conspired against the historic ‘economic engine’ of the old continent. Freedom from the pandemic has come with the end of cheap Russian gas a Ukraine from the war (necessary for a strong Teutonic industrial branch), some interest rates Much higher (after the inflation wave) and more pronounced changes in dynamics since then China (The Chinese ‘friend’ already buys less added value from Germany because of its weakness after Covid and because it produces it itself). So much for Berlin, which was already facing structural headwinds and now sees its American ‘friend’ giving up its hand at the top of the cliff.

Although they are a far cry from the 60% impact intended for China, Trump’s proposed 10% US tariffs for Europe pose a clear threat. Especially for Germany which has seen how the aforementioned American ‘friend’ has continued buying from it, while Beijing, which was its excellent trading partner in recent decades, moved away. An excellent ‘lifesaver’ for an economy whose exports represent approximately 50% of GDP.

Exports to the US represent about 3.8% of German GDP. And represents 10% of the country’s total exports. As economist Stefan Koliak confirmed in a BNP Paribas report this summer, the trend has gone further: “Exports to the US are already boosting German foreign trade, which has contributed to a significant change: the largest The US returns as a supplier, ahead of China. For Germany, exports to the US represent a true growth engine: +5.6% in the first four months of 2024 compared to the same period in 2019 “+40.4% (compared to China’s +3.2% over 2019)”.

Daniel Kral (Oxford Economics): “If America becomes protectionist, Germany will collapse”

Looking at these figures, it is normal for Germany to hold its breath Analysts have put themselves in the worst possible positionDaniel Kral, an analyst at Oxford Economics, warned of this possibility a month ago, when there was still hope for a Democratic victory in the US. “China has moved up the value chain and is no longer driving Germany’s export-led growth. If the US becomes protectionist, Germany will lose out,” the analyst published in an article. Post of X in which he used the expression is cookedWhich can be translated into Spanish as ‘lost’ or ‘eliminated’.

The election results – with Trump leading in votes in the Senate and House of Representatives – have confirmed the worst signs. “Looking ahead, the short- and long-term prospects for the German economy are bleak. Trump’s second term and potential new trade tensions will weigh on the German economy,” says Carsten Brzeski, ING’s chief economist and regular ‘Doctor’. German economy. “Although Exports may increase in the short termAs importers try to get ahead of tariffs, will probably fall “If Trump follows through on his threat,” Capital Economics’ Franziska Palmas says without touching on the hot topic.

The hole may be particularly large ailing automobile sectorWhich was once the ‘crown jewel’ of German industrialism. Brzeski said, “It doesn’t take much imagination to imagine that US tariffs on European cars would put the German car industry in deep problems.” national symbol, volkswagenand other historical brands such as BMW one of the two mercedes benz They do not stop attracting negative headlines in the press: continuous cuts in profit estimates, continuous shocks in Chinese demand, plant closures even on German soil, declining sales due to cheap Chinese models… A commercial shock would be a ‘coup’ by Trump. And, in anticipation of this, investors punished brands like BMW in the stock market just yesterday, leading to a loss of more than 7%.

Its consequences will not take long to spread to large parts of the economy. Growth prospects have diminished after Trump’s election. Goldman Sachs now expects Germany’s GDP to grow only 0.5% in 2025 (down from 0.9% previously) and Berenberg has cut its forecast from 0.5% to 0.3%.

“He weakening of foreign demand And there is increased uncertainty at a time when profit margins Cuts are being made, this will harm investment and make the outlook bleak employmentEspecially if we take into account the considerable accumulation of labor after the pandemic,” warned the UniCredit research team headed by Daniel Vernazza in a note to clients.

negative impact It can even reach the pockets of Germans“Higher tariffs divert US demand from goods produced in the Eurozone and Germany, thereby reducing inflation in the Eurozone. However, increasing US tariffs cause the dollar to appreciate, making imports from the Eurozone more expensive. Furthermore, retaliatory tariffs from the EU can be expected with a time lag from 2026, which will also drive up consumer prices in Germany,” explains Jörg Kramer of Commerzbank.

In a report titled ‘What Trump’s victory means for Germany’, Cramer highlights another negative consequence for Germany of Trump’s return, which is nothing more than a one-upmanship. The largest exodus of companies from Germany to the other side of the AtlanticIntensifying an event that was already occurring: “(The President-elect) has announced his intention to reduce the corporate tax rate from the current 21% to 15%. After his first presidential term, , it is likely that he would implement this plan on a large scale, which would make Germany even more defensive (including trade taxes) which are already significantly higher than the US or other European competitors “Trump’s victory will lead to tax competition and The support will accelerate the trend of German companies increasingly moving their production to the United States.”

Ukraine, NATO and national politics

Another negative point has been found by Kramer geopoliticsAlthough this is a problem that affects all of Europe, Germany attracts a lot of attention in everything ukraine And future of nato: From criticism of Chancellor Olaf Scholz for being lukewarm in his support of Ukraine to pressure on the European ‘locomotive’ for the Biden administration to increase its defense spending to 2% of GDP. Trump’s withdrawal opens up many unknowns on this front, but the president’s ambiguous attitude toward NATO is a long-term risk that is often underestimated, Cramer highlighted. “Trump could pressure European countries to spend more on defense, as he did in his first term,” says UniCredit’s Vernazza.

“This would not be a problem if there was no significant military threat in Europe. But Russia is the aggressor and the defensive capabilities of the European democracies are weak. Therefore, there is a certain risk that after a possible victory over Ukraine in a few years, a heavily armed Russia becomes against the Baltic countries, for example, without unlimited security guarantees from the United States within the framework of NATO, Investors may start pricing in military conflicts in Europe at some point With a low but negligible probability. “This will have a clearly negative impact on financial markets and economic growth,” explains the German economist.

From ING, Brzezski warns that uncertainty about US support for Ukraine will not only affect it Investment and consumption prospectsBut it is also a major political issue in Germany, which recently led to the collapse of the German government and its potential economic fallout. New elections next March

From which the only viable arithmetical option that could emerge right now is an ‘uncountable’ grand coalition between the CDU and the Social Democrats.

“In the short term, this downturn is likely to weigh on sentiment and lead to a decline in investment and consumption. From a more positive perspective, a new government may or may not ultimately end the current situation on the economic side. In Germany policy and provide the country with the long-awaited certainty and guidance In terms of economic policy on how to restore growth and competitiveness, economists are cautious, acknowledging that Germany’s growth prospects will largely depend on “a potential trade war and even a tightening of the national economy.” Will depend on the capability of the new government. Strict industrial policies in America.