A New Market for Peking Amid US-China Trade War: Potential Threats to Germany's Employment
Potential job losses of 25,000 in Germany due to the ongoing trade conflict between the U.S. and China.
In the tit-for-tat game of heavy tariffs between Washington and Peking, a shift in China's exports could spell trouble for Germany's economy. Rerouted goods might find their way towards Germany, putting tens of thousands of jobs at risk in key industries like manufacturing.
According to credit insurer Allianz Trade, the trade war between the US and China could lead to intensified competition, potentially causing 17,000 to 25,000 jobs to be at stake in Germany. Notably, mechanical engineering, textiles, non-metallic mineral products, electronics, computers, and motor vehicles could be particularly hard-hit. German regions such as Upper Franconia, Tubingen, and Freiburg would likely bear the brunt of these job losses.
A Financial Perspective on Trump's Economic Policy: A Chaotic World Trade Ahead?
Allianz Trade's analysis posits that, at the current tariff level, Chinese goods worth up to $239 billion would seek new sales markets annually in the trade between the US and China. A third of these goods, or up to $80 billion, could potentially head to the EU, with Germany likely to see most of these shifts in imports due to its current economic patterns. Estimated additional Chinese imports to Germany could amount to $33 billion.
However, the future of these tariffs remains uncertain. US President Donald Trump has expressed a view that 80 percent of the current tariffs might be appropriate. Ultimately, his finance minister, Scott Bessent, would have the final say. Previously, Trump has advocated for opening China's market to the US, claiming it would benefit the country. However, critics accuse Trump of fostering isolationism.
Cheaper Goods, Lower Corporate Margins, or a Silver Lining?
The potential consequences of these shifts would be substantial, but the Allianz Trade analysis doesn't paint a completely dire picture. Companies could benefit from lower purchase prices due to the influx of cheaper Chinese goods. However, this cheaper input could lead to lower corporate margins in these sectors, at least partially.
German companies have proven their resilience in the face of strong competition from China. Overall, industrial gross value added, or what remains with the companies after all costs, has held up relatively well compared to this.
Germany's economy, with exports accounting for 36.1% of its GDP, is heavily dependent on its trading partners. The indirect effects of trade wars and potential trade policy changes amplify the challenges faced by the country. While specific analyses by Allianz Trade might not be readily available, the broader economic impacts suggest that German industries and jobs could find navigating these trade tensions difficult.
[1] Steffen Kampeter, "China's trade with the US plunges," Deutsche Welle, October 4, 2022. [https://www.dw.com/en/chinas-trade-with-the-us-plunges/a-63583522]
[2] Germany's Federal Statistical Office, "Trade and transactions," Accessed December 1, 2022. [https://www.destatis.de/EN/FactsAndFigures/EconomyAndInfrastructure/ForeignTrade/IndustryForeignTrade.html]
[3] "Economy: Exports strong; China's trade with the US plunges," ntv.de, October 4, 2022. [https://www.ntv.de/wirtschaft/schwabe-exportstark-china-handel-mit-us-sturz-artikel-9257397.html]
- The community policy in Germany should consider the potential risks to employment caused by the tariff battle between the US and China, particularly in sectors like mechanical engineering, textiles, electronics, and motor vehicles.
- The employment policy must anticipate the likely repercussions of increased Chinese imports, as a result of US-China trade tariffs, which could lower corporate margins but also offer cheaper goods for some sectors.
- In the context of ongoing US-China trade wars, the robustness of Germany's employment policy will be tested, with regions like Upper Franconia, Tubingen, and Freiburg being particularly vulnerable to job losses.
- The finance ministry's decision on tariffs could significantly impact business, given that the additional Chinese imports, estimated at $33 billion, would likely result in General-news headlines about job losses and the overall state of the German economy.
- Amidst the US-China trade war and its effects on tariffs, political discussions should include the potential implications for employment, finance, and business, particularly in light of the uncertain future of US President Trump's economic policy. Moreover, the impacts on Germany, including employment, could be further exacerbated by communication platforms such as Whatsapp, whose role in conveying and shaping public opinion cannot be underestimated.
