Enormous Potential for Crisis

Donald Trump’s tariffs threaten to drastically impact Germany. However, the real risk lies in the continued global escalation of this conflict.

President Donald Trump is serious about his threatening tariff politics. After levying and raising tariffs on goods from Mexico, Canada and China, drastic tariff increases will soon follow for the EU and thus Germany as well. This is the beginning of what economists call a “trade war.” Hard times are looming over the world economy. This seems especially bitter for the extremely export-oriented German economy. But the real danger is not that German companies are losing an important market.

The United States is the largest, but by far not the only, market for the German economy. About 10% of exports from Germany go to the United States: primarily cars, machines and chemical products. This mostly pertains to very high-quality goods for which pricing competition is not decisive. Anyone who buys a German luxury car is prepared to spend more, without a doubt. German machines don’t have a world-class reputation because they’re so expensive. They are also not readily replaceable because many companies are extremely specialized.

However, in light of the president’s unpredictable escapades, it would be better for German companies to seek other markets for the purpose of risk prevention. Trump’s tariff attacks cannot be taken seriously enough; their goal is the brute-force alteration of the world economy. The potential escalation of the tariffs on all sides conceals an enormous potential for crisis because prices will rise drastically and economic exchange will become much more difficult.

Many countries will be tempted to respond not only with higher tariffs on American goods, but also on products from other countries. They will be afraid of being flooded with goods that are no longer being shipped to the United States. In this case, the correct answer to Trump would be for the rest of the community of nations to form new trade alliances that follow fair rules without the United States.