The average German will not really feel Trump’s tariffs in the wallet, says Diw economist Fratzscher. The consequences in the USA are likely to be more serious. Fratzscher sees opportunities for Europe – if it reacts correctly.
Tagesschau24: US President Donald Trump swings the customs hammer. Should we duck away or hold up?
Marcel Fratzscher: Absolutely hold up. Because ducking away means that Trump is encouraged to continue to escalate.
Donald Trump has made a big mistake with these trade tariffs because he directed them against the whole world, all occupied with tariffs – sometimes significantly higher than the 20 percent for the EU. The greatest economic damage besides Canada and Mexico, the neighbors of the United States, will happen to the USA itself.
This moment is now an opportunity for Europe to define very clear red lines and also correct mistakes in the past. For example, the US digital corporations that ignore competition law, data protection and many other rules in Europe and hardly pay any tax here. There is now the opportunity to show clear edge and to show Trump the limits to prevent escalation.
Nevertheless, it is clear that Trump remains unpredictable. We don’t know how to proceed today.
Marcel Fratzscher is President of the German Institute for Economic Research (DIW) in Berlin. The economist also teaches as a professor of macroeconomics at the Humboldt University in Berlin.
“Could Germany drive back into a recession”
Tagesschau24: This all -round hit 185 countries. Where would you sort Germany among the suffering countries?
Fratzscher: In the lower half. According to our calculations, the tariffs announced for Germany could reduce German economic output by 0.3 to 0.4 percentage points. You can’t ignore that. The German economy weakens anyway and this loss could also drive it back into a recession.
In Germany it will hit some industries more than others, the export companies of the automotive industry and mechanical engineering, for example. But this damage is manageable in the overall economy. There is a risk that there is an escalation. But what has now been announced does not have the dramatic consequences that some fear.
In comparison, the United States could lose five to ten times more economic dynamics. The prices in the USA will increase much more.
Marcel Fratzscher, Diw Berlin, on Trump’s customs war and its consequences
“It is rather the digital Services “
Tagesschau24: What do tariffs mean for private households and consumers in Germany? Do we threaten a job reduction?
Fratzscher: I do not expect systematic price increases. One or the other American product could become more expensive – although the Americans don’t sell so many goods with us. It is more of the digital services that are financed by advertising and skimming data.
Other products could be cheaper. Because all countries in the world – apart from the USA – are now trying to sell products that they cannot sell in the United States elsewhere. Some prices could therefore fall because the competition increases. So we don’t have to worry about that we have a high inflation or price increase in Germany.
As for jobs: In the automotive industry and mechanical engineering, which are already weak, it could be more difficult. But I now do not count over the overall economy with no strong effects that the average citizen in my wallet would really feel.
“Correct mistakes from the past”
Tagesschau24: You addressed the tech company. We all use Google, Apple, Amazon or X from Elon Musk. As to set up with tariffs or countermeasures, strategically sounds, but so far there has been something like biting inhibition compared to the tech corporations. Do you think a rethink at EU level is realistic?
Fratzscher: Yes, absolutely. And that is exactly the chance now. In the past, this has not been done for two reasons. On the one hand because you said: We don’t want to provoke Donald Trump and thus trigger conflicts. On the other hand, real alternatives to American products were often missing.
Now the conflict is there, and now it is important that Europe holds it. We have no smaller economy than the United States and the American economy is heavily dependent on the global economy. Now it is about correcting mistakes from the past and insisting on the fact that US digital groups, which are largely among the greatest supporters of Donald Trump, also pay the adequate price and adhere to the European rules.
Now the time is to enforce this with all the consequence – even if it may hurt some companies in Europe at short notice, because then you have to focus on new apps or new products.
The interview led Jan Starybaum, Tagesschau24. It was adapted and shortened for the written version.
