Shift in Business Focus: EU Companies Might Boost Exports with EU Council's Help
- Investigation Demonstrates EU Trade Could Counterbalance U.S. Export Levels
Ready for some trade talk? The trade wars and escalating US protectionism are prompting German exporters to refocus their attention towards Europe,predict some industry experts. A new study by Deloitte suggests that a robust European economy could actually overshadow the potential decline in US exports. However, for this to happen, the EU needs to scrap existing trade barriers.
According to Deloitte analysts, the trade restrictions announced so far as of mid-March would cause a 3.2% annual dip in German exports to the US by 2035. This would mean a slide from the current €84 billion to €59 billion over the next ten years. In their initial forecast for 2035, they had hoped for a steady 1.8% growth in US business, before the tariffs set by President Donald Trump were announced or implemented.
On the flip side, they've upgraded their predictions for Europe. Exports to the top 10 customer countries are predicted to grow by an average of 2.5% per year instead of the 1.8% anticipated initially. This potential growth could overcompensate the dwindling US business - at least in nominal terms, disregarding inflation. As of now, the combined sales to the top 10 European countries already surpass the American market by a whopping 4 times, totaling €357 billion. By 2035, this figure would almost triple, reaching €467 billion.
Oliver Bendig, partner and head of industrial consulting at Deloitte, has this to say: "The EU internal market is a sleeping titan for German industry. But, it can only fulfill its potential if the EU removes existing trade barriers." If this happens, the study asserts, we're looking at significantly higher growth rates. Given the rising tide of protectionist sentiments in global trade, European industries could use a boost from Brussels.
Non-Tariff Barriers: The Hidden Challenges
Even 30 years after the establishment of the European internal market, non-tariff barriers still pose significant hurdles in trading with EU countries. These obstacles include disparities in product rules and certifications, regulations on packaging and disposal, mounting reporting obligations, and complex tax requirements. "The administrative burden on German companies dealing with Europe is massive, and it's evidently risen in recent years," confesses Bendig.
Deloitte estimates that these administrative hassles add up to an extra cost of up to 44% for industrial goods, based on IMF calculations. If half of these barriers were removed, the study expects an extra 1% growth per year in trade with most EU countries by 2035. If all the barriers were eliminated, this could lead to a doubling of the growth rate, translating to an additional 1% increase per year in most EU countries.
The mechanical engineering and electrical industries would see the most significant gains due to their high initial trade barriers. The positive impact is less pronounced for automotive and chemical sectors, where the trade barriers within Europe are already comparatively lower.
- Internal Market Integration
- Trade Wars
- Protectionism
- European Economy
- US Exports
- Deloitte
- Germany
- Trade Barriers
- EU Countries
- Non-Tariff Barriers
- Operational Costs
- Trade Efficiency
- The EU Council could aid EU companies in boosting exports towards Europe as a result of the trade wars and escalating US protectionism, according to Deloitte's study on emerging developments.
- The removal of existing trade barriers within EU countries could potentially overcompensate the potential decline in US exports and could lead to significantly higher growth rates, as suggested by the study.
- Non-tariff barriers, such as disparities in product rules and certifications, regulations on packaging and disposal, mounting reporting obligations, and complex tax requirements, continue to pose significant challenges for German companies trading with EU countries, adding up to an extra cost of up to 44% for industrial goods.
