In his interview in the German newspaper Die Zeit, Nagel stated that Trump’s election as president would negatively affect the German economy.
Stating that Germany is already facing a weak growth this year and next year, Nagel said, “If new customs tariffs are put into effect by Trump, the growth in the German economy will move into negative territory. This may cost 1 percent of Germany’s economic production.” he said.
This rate corresponds to approximately 41 billion euros, based on Germany’s 2023 gross domestic product.
Nagel also drew attention to the problems and outlook of the employment market in Germany and said, “The jobs we have lost in the industry may not be replaced by new jobs in the service sector as easily as before.” made his assessment.
Arguing that the current interest rate level of the European Central Bank (ECB) is appropriate, Nagel said, “We are not exaggerating. There is still a visible price pressure, and this pressure comes mainly from the service sector due to wages.” he commented.
On the other hand, the ECB reduced the policy rate 3 times this year. The bank last made its third interest rate cut on October 17, in line with market expectations, and reduced the three main policy rates by 25 basis points against the weakening economy.
The bank reduced the deposit rate, which is very important for financial markets and at which banks transfer their excess deposits to the ECB in the short term, by a quarter point to 3.25 percent.
There, Trump, who will be sworn in as US President again in January, announced that if he wins the election, he will significantly increase customs duties to reduce the foreign trade deficit and support domestic production.
Trump wants to impose a 10 or 20 percent tariff on all imports from the EU. While the United States is the largest buyer of German goods, approximately 10 percent of Germany’s exports go to the United States, the world’s largest economy.
According to data from the German Automobile Association (VDA), approximately 400 thousand cars were exported from Germany to the USA last year. In the first half of 2024, the United States became the most important buyer of German automobile exports.
Analysts note that Trump’s implementation of a more protectionist policy through customs duties on EU imports does not bode well for the export-oriented German economy.
