New trade deals may shield Germany's economy from US tariffs: ifo

The study estimated that German exports could rise by up to 4.1 per cent if new agreements with seven key trading partners are implemented, even as US tariffs remain in place. Germany’s gross domestic product (GDP) is projected to increase by up to 0.5 per cent under this scenario.

The assessment is based on the European Union’s trade agreement with the Mercosur states—comprising Brazil, Argentina, Uruguay, and Paraguay—alongside potential agreements with India, Australia, Indonesia, Malaysia, Thailand, and the United Arab Emirates.

In contrast, the study warned that without new trade deals, US tariffs could reduce Germany’s GDP by 0.13 per cent and cut exports by 1.3 per cent in the medium term, underlining the economic risks of rising global trade protectionism.

“The signing of the trade agreement between the EU and the Mercosur states is an important first step. However, additional trade agreements with other trading partners are needed to compensate for the negative consequences of US tariff policy,” said Lisandra Flach, director of the ifo Center for International Economics. “The EU should concentrate on also achieving swift results in the currently ongoing free trade negotiations. The trade agreement with Indonesia, for example, has already been negotiated and is on the table.”

ALCHEMPro News Desk (SG)