German Economic Institute conducts analysis: 'What happens if Trump is re-elected?'

The German Economic Institute (IW) has published its analysis on the economy titled "What happens if Trump is re-elected?"

According to the analysis, "Trump being re-elected as US President in November 2024" and "fulfilling his commitments to increase tariffs in order to reduce the US trade deficit" could lead to significant disruption in the global trade order.

THERE ARE TWO SCENARIOS

IW economists modeled a first scenario in which US customs duties are increased to 10 percent on all US imports and 60 percent on US imports from China in 2025; and a second scenario in which China retaliates with a 40 percent tariff increase on imports from the US.

The analysis states that if Trump raises customs tariffs to reduce the US trade deficit, exports of German products will slow down, and it is noted that compared to a baseline scenario with no new trade and customs disputes, Germany's gross domestic product (GDP) could be 1.2 percent lower in 2028 starting from 2025.

The analysis emphasizes that Germany will be the most affected country within the EU by Donald Trump's policies, noting that the country's GDP losses, calculated at constant prices over 4 years, would be 120 billion euros in the first scenario and 150 billion euros in the second scenario.

WILL BE LOWER IN 2028

According to the IW, demand from Germany's most important export partners could be approximately 5.5 percent lower in 2028 compared to a situation where there are no tariff increases. This corresponds to a 4.5 percent decline in German exports.

In both scenarios, the real US GDP level will be approximately 1 to 1.4 percent lower than in a situation without a tariff dispute. GDP losses in the US, calculated at constant prices over 4 years, could amount to approximately 600 billion dollars in scenario 1 and approximately 1 trillion dollars in scenario 2.

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