Frankfurt (Reuters) – Germany is particularly vulnerable to American customs duties which could slow growth for the years to come and grew an economy that already suffers from two consecutive years of contraction, said the president of the Bundesbank, Joachim said on Monday on Monday Nagel.
“Our strong orientation towards export makes us particularly vulnerable,” said Joachim Nagel in a speech. “Economic production in 2027 would be almost 1.5 percentage points lower than forecasts,” he added.
The Bundesbank predicts growth in the German economy of 0.2% this year and 0.8% in 2026, which suggests that an impact of 1.5% over the next three years would lead to a greater contraction of the economy.
Admittedly, the Bundesbank models based on the price threats of American president Donald Trump conclude that Germany would suffer such policies. But they also conclude that the consequences for the United States would more than compensate for any positive impact of trade barriers.
“Contrary to what the (American) government has announced, the consequences of customs tariffs for the United States should therefore be negative,” said Joachim Nagel. “The loss of purchasing power and the increase in the costs of inputs for intermediate consumption would prevail over the competitive advantages of the American industry”.
Fabio Panetta, the Governor of the Italian Central Bank, also said on Saturday that the United States would be hardly affected.
According to him, the growth of world GDP fell 1.5 percentage points and the US economy of 2 percentage points if the customs duties mentioned by Donald Trump during his partner were set up and followed by retaliatory measures.
The major risk, according to the Governor of the Italian Central Bank, is that Chinese companies excluded from the United States are looking for new markets and oust European producers.
The German central bank is less formal with regard to the consequences on inflation. One of the models leads to a minor impact while the other leads to a strong increase in pressures on prices because the retaliatory customs prices would be passed on to consumers, while the weakness of the euro would weigh on the costs of Import, detailed Joachim Nagel.
(Written by Balazs Koranyi; Bertrand de Meyer, edited by Kate Entringer)
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