With former President Donald Trump's re-election to the White House and the collapse of the federal government under German Chancellor Olaf Scholz, Germany is facing uncertain economic and political times.
Since the campaign, Trump has committed to raising import tariffs on friends and foes alike under the “Trump Reciprocal Trade Act” which will raise all US tariffs to match the tariffs imposed by each corresponding country.
“If India, China, or any other country hits us with a 100 or 200% tariff on American goods, we will hit them with the exact same amount,” he said in his campaign program. “If we charge, we charge them – eye for eye, tax for tax, the exact same amount.”
Former President Donald Trump addresses a rally crowd Sunday, Oct. 6, 2024 at the Dodge County Airport in Juneau, Wisconsin. (Jovanny Hernandez/Milwaukee Journal Sentinel / USA TODAY NETWORK via Imagn Images)
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However, it is unclear whether the president-elect still plans to increase these tariffs, as he has also proposed a 10% tariff on imports from all countries, and a 60% tariff on imports from China, according to the report. Reuters report.
China was not the only country in Trump's high ranking, as the president-elect also called the European Union (EU) a “mini China” and warned that the organization will have to pay.
“They're not taking our cars. They're not taking our farm products. They're selling millions and millions of cars in the United States,” he told supporters at an October rally in Pennsylvania. “No, no, no. They will have to pay a lot of money.”
Some economists have warned that the tax increase – paid by importing companies, not government agencies – could lead to higher costs around the world, including in the US, and higher inflation.
A report earlier this month by the German Marshall Fund (GMF) pointed to the findings of Germany's Institute for Economic Research in Cologne, which states that the tariffs promised by Trump are estimated to cost the country approximately $127 billion over the next four years.
German Chancellor Olaf Scholz leaves Bellevue Palace in Berlin on Thursday, Nov. 7, 2024. (AP Photo/Ebrahim Noroozi)
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“Trump's victory does not go down well with Germany, which relies on US security and thrives on open markets,” GMF said in its report on how the US election will affect Germany. “And the uncertainty in Europe's largest economy is not good when the EU needs to find its place in a world where the US president is not expected to support the traditional, rules-based international order.”
However, it is not only Germany's struggling economy that could mean uncertainty about Berlin's global standing, as Scholz faces a no-confidence vote in January after he fired Finance Minister Christian Lindner and the coalition government collapsed.
A vote of confidence will now be held in Germany on December 16 – which Scholz, given his minority position, is expected to lose.
European Commission President Ursula von der Leyen speaks during a debate at the European Parliament in Strasbourg, eastern France, on Jan. 17, 2024. (Frederick Florin/AFP via Getty Images)
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The most likely next step would be for German President Frank-Walter Steinmeier to dissolve parliament and call snap elections for Feb. 23, 2025.
The EU is now looking at a possible trade war with the Trump administration while one of its leading countries, geographically and economically, will essentially sit as a lame duck while Berlin waits to see who will be next to lead the country.
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German opposition leader Friedrich Merz – who could become Germany's next chancellor – has said he intends to cut a deal with Trump.
In an interview with Stern magazine, Merz is reported to have said, “In Germany, we have never spoken up and emphasized our interests enough, and we have to change that.
“The American people are too many to attack. It should not end with only one side gaining, but instead we are making good plans for both sides,” Merz said according to Bloomberg's report on this interview. “Trump can call it a deal.”
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