Germany's Institute for Economic Research: 50% U.S. tariffs may cost Germany about EUR 200 billion by the end of 2028

Germany's Institute for Economic Research: 50% U.S. tariffs may cost Germany about EUR 200 billion by the end of 2028

Germany's Institute for Economic Research (IW) has released a report indicating that a potential 50% tariff on all imports from the United States, as threatened by President Donald Trump, could cost Germany approximately EUR 200 billion by the end of 2028 [NUMBER:1].

The report, released on May 24, 2025, highlights the significant economic impact that such a tariff could have on Germany's economy. The Institute estimates that the tariffs would increase the cost of goods imported from the U.S., leading to a substantial rise in consumer prices and a potential decrease in demand for German goods. Additionally, the report suggests that the tariffs could lead to a shift in global trade patterns, with other countries potentially filling the gap left by reduced U.S. imports.

The report also notes that the tariffs could have a disproportionate impact on certain sectors of the German economy, such as the automotive industry, which relies heavily on imports from the U.S. The Institute estimates that the automotive sector could face costs of up to EUR 50 billion by the end of 2028.

In response to the threat of tariffs, German Foreign Minister Johann Wadephul has stated that the EU's executive commission has Germany's full support in working to preserve access to the American market. However, the Institute's report suggests that the potential economic costs of the tariffs may make it difficult for the EU to reach a compromise with the U.S. on trade issues.

The report comes as investors are already reacting to the potential impact of the tariffs. As of 10:30am in New York (14:30 GMT) on May 24, 2025, the Dow was down 0.6 percent, the tech-heavy Nasdaq was down 1 percent, and the S&P 500 was down 0.8 percent. Apple, which has been a target of Trump's tariff threats, saw its stock drop by 2.3 percent from the market close the previous day.

The report by the Institute for Economic Research underscores the potential economic consequences of the U.S. tariff threats and highlights the need for both sides to engage in meaningful negotiations to avoid such a significant economic impact.

References:
[1] https://www.aljazeera.com/economy/2025/5/23/trump-threatens-50-tariffs-on-eu-25-on-apple-ratcheting-up-trade-war