German-US Trade Relations before the Election: Implications of a Trump Comeback

Andreas Baur, Lisandra Flach and Dorothee Hillrichs

EconPol Forum, 2024, vol. 25, issue 05, 27-31

Abstract: The US is Germany’s largest trading partner, accounting for 11 percent of German exports and 7 percent of imports in 2023. Services comprise nearly 50 percent of German imports from the US and 30 percent of exports to the US, underscoring their significance in bilateral tradeGermany maintains a large trade surplus with the United States, equivalent to approximately 2.1 percent of Germany’s GDP in 2023. One major driver of the surplus is a substantial increase in German goods exports to the US in recent years while German goods imports from the US have stagnatedIn terms of value-added, around 7 percent of Germany’s manufacturing value-added is exported to the US, compared to only 0.8 percent of US value-added exported to Germany, highlighting the importance of US market access for the German economyA simulation exercise shows significant decreases in German exports to the US and China in response to potential new tariffs that Presidential candidate Donald Trump announced in his campaign. However, trade diversion in form of increasing trade between Germany and other countries partially offsets the negative direct effect of US tariffs, resulting in a 2 percent overall decrease in German exportsGermany and the EU should prioritize deepening its single market, especially in services, to remain an attractive US trade partner. Simultaneously, the EU should pursue new trade agreements to mitigate risks from potential US protectionist measures.

Date: 2024
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