Radical plan

Customs policy could cause the US economy to crash

Trump wants to radicalize his "America first" economic promise.

(Bild: AFP/Getty Images/Kevin Dietsch)

According to an IMK study, the re-election of Donald Trump as US president could noticeably slow down the growth of the German economy. This is because the tariff increases announced by the Republican during the election campaign are likely to significantly dampen not only the US economy and the global economy.

"German gross domestic product (GDP) could also be a good one percent lower in the first two years after the introduction of the tariffs than without such an escalation of tariffs," according to the analysis published on Thursday by the economists close to the trade unions. This would also have knock-on effects for the domestic economy.

The German government and the EU could cushion the negative effect with investment programs implemented in the short term, the researchers explained. Trump's possible return to the White House is keeping politics and business busy. The 78-year-old has announced new tariffs in the event that he wins the election against US Vice President Kamala Harris of the Democrats on November 5.

Tariff king Donald Trump
Trump has held out the prospect of a 60 percent tariff on "everything" from China and tariffs of 10 to 20 percent on all other imports. Harris is not considered an advocate of free trade either, write the IMK researchers led by Sebastian Dullien. However, extensive tariff increases, as announced by Trump, are not to be expected from the Democrat.

The IMK experts run through several scenarios. One simulates substantial tariff increases against China and the rest of the world as well as strong trade policy reactions from China towards the USA. "Such retaliatory measures are to be expected after the experience of the US-China trade conflict during Trump's first term in office." It is remarkable "how hard the US economy would be hit in this scenario", it said.

US economy would shrink considerably
At the end of 2025, just under a year after the assumed introduction of such tariffs, the US gross domestic product would be almost 4 percent lower than in the scenario without new tariffs. "In the fourth quarter of 2026, it would even be more than 5 percent and at the end of the calculation period at the end of 2028, the loss in economic output would still be just under 5 percent."

To make matters worse for the German economy, the setback would come at a time when the industry has not fully recovered from the energy price shock caused by the Russian invasion of Ukraine and is already under pressure due to "the aggressive industrial policy of China and the USA". "A further negative external shock could contribute to a consolidation of the current stagnation phase," warns the IMK. The German economy is currently teetering on the brink of recession.