Financial markets issued their judgement rapidly and reasonably clearly, even though the US stock exchanges themselves were already closed erstwhile US president Donald Trump announced fresh customs increases. Future contracts for the broad US S&P index lost 1.7 percent, and those for the Nasdaq index, in which technologies dominate, almost 2 percent. On the another hand, the gold grew significantly, climbing above $3,150 a troian ounce. “Retaliation tariffs are much more aggressive than expected,” said Tai Wong, an independent metallic dealer.
Not only is he surprised, most economists and business representatives too. And they are mostly pessimistic. Carsten Brzeski, the chief economist of ING, put it most drastically: "The 1930s have returned," he says. In 1930, then US president Hoover raised import duties on many products under the Smoot-Hawley Tariff Act, which yet was preluded to the trade war and The large Depression of that time has intensified.
The economical situation is much better now and most economies are developing. However, the consequences may be serious. “We presume that economical growth in the US and their trading partners will weaken after the imposition of duties,” says Eiko Sievert of the rating agency Scope.
The president of the Institute of planet Economy in Kiel, Moritz Schularick, described the fresh American duties as a major shock to global trade. "If these duties stay in this form, it will be a turning point for the global economy as we know it. We will then find ourselves in another planet trade system. This will truly hurt, including Americans," said Schularick in an interview with “Handelsblatt”. The hazard that the U.S. might fall into recession has become much more likely with Trump's "tariff rundown". According to his institute's calculations, inflation in the US will increase by respective percent.
"We'll feel it"
Dirk Jandura, president of abroad Trade, expects negative consequences for the German economy. “I say this rather openly: we will feel it,” said the president of the German Association of Wholesale, abroad Trade and Services (BGA). “We will gotta translate tariffs into an increase in prices, and this will in many cases mean a decrease in sales,” he explained. The Institute of Ifo expects to decrease exports by 15% as a consequence of the introduction of duties.
Jandura fears that This may besides mean the end for smaller companies that have already been weakened in fresh hard years. It would besides affect their employees. However, he warned that creating specified trade barriers would surely harm both parties. “This is an economical dead end that will origin crucial failure of prosperity on both sides of the Atlantic,” he said.
The United States is Germany's most crucial trading partner and the largest buyer of "Made in Germany". German exports to the world's largest economy amounted to more than EUR 161 billion last year , reaching evidence levels. The United States is, for example, the largest car buyer in Germany: 13.1 percent of all fresh vehicles exported last year were there.
The president of the German Automotive manufacture Association (VDA), Hildegard Muller, identified the latest tariff announcement as a fundamental change in trade policy. "The United States turns its back on a principle-based global trade order — and thus on the basis of global value creation and corresponding growth and prosperity in many regions of the world. It is not America first, it is America alone, ” she explained.
According to VDA's chief, the announced measures represent a immense burden for both companies and global automotive supply chains. "Consequences of 25-percent duties to be imposed on passenger cars, light utility vehicles and any car parts are inactive hard to estimate," said Muller. However, it is clear now that these changes will have a negative impact on global growth and will besides cost jobs.
SVEN HOPPE / PAPBMW logo on the sign in the main building of the vehicle maker in Munich, Germany, 2 February 2025.
The EU must stay cold
Muller called on the EU to take a firm position, signaling its readiness to negotiate. “The EU can and must act confidently and put all options on the table,” said VDA president. For example, the velocity and determination with which free trade agreements are concluded should be importantly increased. — Concrete results must be achieved with as many regions as possible in the world. The EU must now advocate free and fair planet trade. The economy of Germany and Europe needs strong alliances and dynamic networks," said Müller. The EU can now position itself as a reliable partner.
Wolfgang Grosse Entrup, Managing manager of the German Chemical manufacture Association (VCI), is of the same opinion. It calls on the EU to keep "cold blood" in consequence to the far-reaching fresh US duties. “The United States is and will stay Germany’s key trading partner,” he said. “The escalation spiral would only increase damage. Our country cannot become a pawn in an escalating trade war," he added. In its response, the EU must "be flexible and in close dialog with Washington". The nonsubjective must be a fair solution for both parties — Europe and the United States.
The question is, is Trump interested? Firstly, duties are, of course, a bargaining chip, according to Solomon Fiedler, economist Berenberg Bank. “ The U.S. government has compiled a list of alleged tariff and non-tariff trade barriers for each country subject to customs duties,” he says. — This should be the starting point for negotiations aimed at a certain simplification in customs duties,” he adds.
But at the same time Trump besides wants to make gross for the US government to reduce the immense budget deficit. The government itself estimates gross at 600 billion dollars, or about 2 percent of GDP per year. Eiko Sievert thinks, however, that is far besides much. Trump besides wants to importantly reduce taxes. In this context, it is so questionable how the US budget situation will improve in the short term.
China’s decisive factor
At best, Trump's stated nonsubjective of softening regulation can advance growth in certain sectors in the short term. In the average to long term, however, this increases the risk. “The coming deregulation of the financial sector may in peculiar increase risks in the financial system,” says Sievert.
According to George Saravalos of Deutsche Bank, it is China will most likely be a decisive origin in how the global economy will cope in the coming months. The biggest negative surprise was undoubtedly over 50-percent. customs work on imports from China but besides Vietnam. This is due to the fact that many exporters presently usage Vietnam as an alternate location.
Only this affected industrial goods with a full value of around 600 billion US dollars. The question now is how China will react, says Saravelos: “Will they effort to “export” a shock to the remainder of the planet by devaluation of the yuan in order to reconstruct the competitiveness of their goods and redirect the supply of Chinese products to the remainder of the world?”
Consequently, German and European companies would gotta deal not only with the decline in exports to the US, but besides with even greater competition from Chinese companies. Unless, of course, the EU responds again to fresh customs barriers against China. Welcome to the 1930s.
