The imposition of tariffs by the United States on German and European goods this year has significantly impacted Germany’s export economy, according to a report released Monday by the Institute for German Economic Research (IW). German exports to the US plummeted by nearly eight percent in the first three quarters of the year compared to the previous year, reversing a trend of average annual growth of five percent between 2016 and 2024. This decline has pushed German US exports below the levels seen in 2022.
The automotive, chemical and mechanical engineering sectors bore the brunt of this downturn, accounting for almost 70% of the export reduction. The automotive industry experienced a particularly sharp decrease, with exports of vehicles and automotive parts falling by roughly 15% in the first three quarters. The mechanical engineering and chemical industries also recorded declines of nearly ten percent each.
The drop in mechanical engineering exports is largely attributable to the exceptionally high US tariffs on steel, aluminum and related products, currently standing at 50%. While the chemical sector’s struggles are also partly linked to these tariffs, other contributing factors are likely at play, including reduced German production stemming from elevated energy prices – a consequence that further constricted export potential.
While the possibility of US President Trump imposing tariffs on European products was anticipated earlier in the year, it triggered anticipatory measures in certain industries. Metal exports, for instance, saw an overall increase of almost 15% in the first three quarters, driven by a surge in the first quarter. However, following the March announcement of tariffs on steel and aluminum, these exports subsequently declined. Pharmaceutical product exports also rose by 1.2% during the same period, though the threat of tariffs up to 100% previously loomed. The eventual resolution between the EU and the US in July, which largely maintained tariff-free status for most pharmaceuticals, preserved a historically strong export performance – averaging nearly ten percent annual growth between 2016 and 2024.
The situation highlights a growing fragility in transatlantic trade relations, prompting questions about the long-term implications for German industry and the broader European economy. Critics argue that the US tariffs, regardless of origin, represent a protectionist strategy that undermines global trade stability and disproportionately harms key German export sectors vital for employment and economic growth. The “pull-forward” effect observed in some sectors underscores the anxiety surrounding potential trade barriers and the ensuing disruptions to established supply chains.
