"A Storm Brewing" Global Trade Tension Snuffs Out Exporters' Bright Outlook
- Exporters' aspirations are hindered by the ongoing customs conflict
The contentious trade dispute between the USA and the European Union shows no signs of abating. Stock markets worldwide tumbled, with the German benchmark index Dax dropping approximately 10 percent at the outset of trading on the initial day of the new week.
The trade spat looms large and overshadows the positive February results of German exporters. "The trade war has been ignited," declares Dirk Jandura, president of the Federal Association of Wholesale, Foreign Trade, and Services (BGA). "The optimistic winds should not deceive."
EU strategizes retaliatory measures against tariff package
The trade ministers of EU member states are gathering in Luxembourg to deliberate ways to persuade US President Donald Trump to rescind the special tariffs. Simultaneously, preparations are underway for potential retaliatory tariffs - in case negotiations fail.
For export-centric Germany, escalating tariffs pose significant peril. "If negotiations unexpectedly fail to yield any results, another economic recession threatens this year," cautions Commerzbank chief economist Jörg Krämer. This would mark the third consecutive year without economic growth for Europe's biggest economy.
"Germany and the EU must quickly find their role in the new world order," warns BGA President Jandura. "Not only Asian, but also African markets offer significant potential for growth and business in the future."
US ready to broach trade negotiations under certain conditions?
Trump hinted at the possibility of discussing easing new tariffs with trading partners under specific circumstances. However, his trade advisor, Howard Lutnick, previously announced that the US government intends to maintain its rigid stance with high import duties on goods from nearly all countries.
Trump's list encompasses 185 trading partners that would face significantly higher import tariffs. The US aims to impose 20 percent tariffs on imports from European Union countries.
Trump seeks to correct alleged trade imbalances and shift production to the USA with tariffs. At the same time, tariff revenues are meant to help finance his costly tax cut promise at least in part.
Germany's exporters enjoy a glimmer of hope in February
At least in export figure terms, February offered a glimmer of hope for Germany: Goods produced in Germany worth a total of €131.6 billion were shipped abroad. This was 1.8 percent more than in January 2025 and 0.1 percent more than a year ago. In January and February combined, exports totaled €260.8 billion, unchanged from the previous year.
The highest German exports were destined for the United States in February 2025: Goods worth €14.2 billion were despatched to the US, an increase of 8.5 percent compared to January, seasonally and calendar-adjusted. In contrast, imports from the US fell by 3.9 percent to €7.6 billion. Exports to EU partner countries increased by 0.5 percent to €70.2 billion within the month.
Recent surveys had raised hope
Trump's tariff package has dashed the burgeoning hope in the German export industry for a brighter future. As recently as the end of March, the Ifo Institute had reported that the German export industry was experiencing growing optimism based on its regular surveys: The number of industries expecting increasing foreign trade had spiked.
Since Trump announced his XXL tariff package, the world of trade has been profoundly reshaped. "Global trade is undergoing a fundamental transformation that will be felt by German companies," says Volker Treier, foreign trade chief of the German Chamber of Industry and Commerce (DIHK). According to DIHK data, 70 percent of companies anticipate negative impacts of US trade policy on their businesses. An anticipated economic recovery will be "completely stalled," says Treier.
The export sector appears to be in a "downward spiral"
Despite gains in December, Germany's exporters ended the year 2024 with a decline. Overall, Germany exported goods worth €1.556 trillion in the past year, 1.2 percent less than the previous year. Ten percent of German exports (€161.4 billion) went to the US in 2024. BGA President Jandura views the export sector, which served as a growth engine for the German economy in good times, as already being in a "downward spiral" for some time.
Enrichment Insights:
- Pervasive Uncertainty: The escalating trade spat between the USA and EU has created considerable uncertainty for German businesses, affecting investments and supply chains, as companies must continuously reassess and manage the risks associated with evolving policies.
- Adverse Impact on the Economy: The US tariffs are projected to widen Germany's trade deficit, as the import content of its exports increases due to higher raw material costs. This could lead to a decrease in the country's long-term competitive edge in the global market.
- Geopolitical Shifts: As trade tensions between major economies mount, the international trade landscape is undergoing a transformation, and companies must adapt their strategies to navigate these complex dynamics, focusing on diversifying their clientele and production locations while monitoring policy developments closely.
- Despite the European Union (EU) member states strategizing retaliatory measures against US tariffs and negotiations being underway, BGA President Dirk Jandura expresses concern, stating, "Germany and the EU must quickly find their role in the new world order."
- In response to the escalating trade tensions, Commerzbank chief economist Jörg Krämer warns that should negotiations fail, "another economic recession threatens this year," potentially marking the third consecutive year without economic growth for Germany.
- Trump's spokesperson, Howard Lutnick, has previously announced that the US government intends to maintain its rigid stance with high import duties on goods from nearly all countries, contradicting Trump's hint at discussing easing new tariffs with trading partners under specific circumstances.
