US protectionism
How Trump’s policies are damaging the German economy
US President Trump’s economic policy is leading to many problems for German companies. While the USA is still doing well economically, the situation here is bleak, economists say.
There is no all-clear: the difficulties the German economy is having with US economic policy are enormous. Leading economists paint a bleak picture of the situation – and are also not very optimistic about the future.
Small and medium-sized industrial companies are struggling enormously, says Volker Brühl, head of the Center for Financial Studies at the University of Frankfurt. Companies with sales of between 100 and 250 million euros are too small to be able to build factories in the USA. They can only export from Germany and are largely helpless against American tariffs.
“That makes the German economy very vulnerable,” says Brühl. It is largely characterized by small and medium-sized family-owned companies, the so-called middle class.
Higher energy costs than Location disadvantage
Ulrich Kater, chief economist at Deka Bank, describes US policy as “the dissolution of the sponsor of the global economic order.” This hits Germany at a time when it already has many of its own problems. “US politics makes it all the more difficult to deal with the structural and location problems,” confirms Michael Heise, chief economist at the asset manager HQ Trust.
Economist Kater cites dilapidated infrastructure, old technology and an aging population as examples of domestic problems: “The country is getting old.” Heise mentions the costs of energy: They are much higher in Europe than in China and the USA, which makes the work of industry more difficult. “It’s pretty critical,” said Heise.
“Americans don’t need a Mercedes”
The USA is only dependent on goods from Europe to a very limited extent. “I don’t have to drink French wine. I can also drink Californian wine,” says KfW Bank chief economist Dirk Schumacher. “I don’t have to drive a Mercedes, I can also drive a Cadillac.”
Schumacher thus contradicts a study by the employer-oriented Institute of German Economics (IW), which found America’s extensive dependence on European goods.
Europe is weak
Europe is also not in a good position politically compared to the USA. Contrary to all the assurances from Brussels and Berlin, Europe is not a strong participant in world events, is the general verdict of economists. Schumacher mentions, for example, the EU’s customs agreement with the USA. It is no better than the agreement between small Great Britain and the USA.
Economist Heise calls the euro another symbol of weakness. The European currency’s share of global assets remains stable at 16 percent and is therefore below that of gold and far below that of the dollar.
America is strong
While Germany and Europe have problems with themselves and the American market, the USA is still doing well economically, according to Frankfurt’s top economists. “Trump managed to devalue the dollar by 15 percent straight away,” remarks Ulrich Kater ironically. Nevertheless, the USA is the most dynamic and stable economy in the world.
The investment company Deka of the German savings banks continues to invest in the USA, says Deka chief economist Kater. HQ Trust manages large German assets, its chief economist Heise confirms that it is investing in America.
“The USA has a productivity and growth advantage,” says Heise. “I don’t see that we would catch up.” Kater notes that the only thing he hears from Brussels is that government money needs to be spent: “We have not yet seen a focus on what we need, namely growth.”
Uncertainty in the USA
The unconventional new US economic policy poses risks not only for foreign countries. Schumacher repeatedly points out the uncertain American public finances. “Fiscal policy is out of control,” said the economist. Public debt is increasing enormously.
“It can’t go on like this,” says Schumacher. He cites the fight against immigration from Latin America as a further problem: “This will severely damage the growth of the USA.” There was a shortage of workers.
The dismantling of the rule of law also has negative consequences that go beyond legal uncertainty in business life. “What this entails is corruption at all levels,” says Schumacher.
