ifo Institute expects German manufacturing industry to shrink 2.8% with tariffs
US President Donald Trump's tariffs may lead to a more than 38% reduction in German exports to the United States, according to German think-tank the ifo Institute's latest report.
The German manufacturing industry is expected to shrink 2.8% if the current standstill in tariff negotiations between Washington and the European Union ends and the sweeping US tariffs are applied to the bloc and Germany.
The report found that German exports to the US will fall 38.5% while German exports to China will decline 2.8% in this scenario.
Germany's auto and pharmaceutical sectors are also expected to be hit. The auto sector is expected to lose up to 6% of its added value and the pharmaceutical sector may lose up to 9%.
Meanwhile, the services and agriculture sectors are expected to grow 0.4% due to tariffs.
The institute bases its estimates on the possible reimposition of reciprocal tariffs that were announced on April 2 as a 90-day tariff pause and negotiation grace period end on July 9.
After July 9, EU exports to the US will be hit with 50% tariffs.
The ifo Institute considered the 25% tariffs on steel, aluminum, automobiles, auto parts, pharmaceuticals and electronic products while making the estimates and excluded retaliatory tariffs by the EU against US imports.
The US was the largest trading partner of Germany in 2024 with a trade volume of over €250 billion ($290 billion).
The US imported German goods worth $186.2 billion, up 2.2% on an annual basis, accounting for 10.35% of total German exports in terms of value.
