Trump Victory: A Severe Blow to Germany's Economic Stability

The recent victory of former U.S. President Donald Trump in the 2024 U.S. presidential election has sent shockwaves across the global economy, with Germany, already grappling with economic challenges, being dealt a severe blow. Trump's protectionist policies, including proposed tariffs on European imports and immigration restrictions, pose significant risks to the German economy and its trade relations.


Trump's proposed tariffs on European imports could have a substantial impact on German exports, with a potential loss of €5.6 billion in exports to the U.S. (Commerzbank, 2024). This would contribute to a 0.1% decrease in German GDP (Commerzbank, 2024). Additionally, retaliatory tariffs by the EU could increase consumer prices in Germany by up to 0.5% in 2026 (Commerzbank, 2024).


Trump's tax cuts and deregulation policies could also have significant implications for German companies and the domestic economy. The reduction in corporate tax rates from 21% to 15% could intensify tax competition, putting Germany further on the defensive. With an average corporate tax rate of just under 30% (including trade tax), Germany is already in 18th place for corporate taxes compared to 20 other industrialized countries. This could lead to increased relocation of German companies' production to the USA. Additionally, less regulation may lead to higher US growth, diverting demand away from goods produced in the eurozone and Germany, potentially lowering eurozone inflation. However, retaliatory tariffs from the EU could also increase consumer prices in Germany, offsetting some of the benefits.

Trump's immigration policies, including mass deportations and strict limits on legal immigration, could have significant implications for the German labor market and economic growth. The German economy relies heavily on immigrant workers, particularly in sectors like manufacturing and healthcare. A sudden decrease in available labor could lead to labor shortages, driving up wages and increasing production costs. This could negatively impact economic growth, as seen in the U.S. during Trump's first term. Moreover, stricter immigration policies could exacerbate demographic challenges, as Germany's aging population requires more workers to support the social security system.


A Trump presidency could significantly impact the European Union's economic stability and Germany's role within it. Trump's tariff plans, if implemented, could increase inflation in the eurozone by up to half a percentage point in 2026, due to retaliatory tariffs and a stronger dollar (Commerzbank, 2024). This could pressure the already moribund economic growth levels across the EU. Additionally, Trump's ambivalent stance on NATO poses long-term economic risks for Germany, which relies heavily on exports to the US and EU markets. Moreover, Trump's proposed corporate tax rate reduction to 15% could intensify tax competition, putting Germany further on the defensive and potentially driving German companies to relocate production to the US.


In conclusion, Trump's victory has dealt a severe blow to Germany's economic stability, with potential impacts on exports, corporate taxes, immigration policies, and the EU's economic stability. Germany's political parties, especially the SPD, Greens, and FDP, will need to respond to these challenges by prioritizing economic resilience and unity. They may advocate for a more pro-business stance, increased environmental and social policies, fiscal responsibility, and market liberalization. Together, they may focus on strengthening the EU, promoting free trade, and addressing potential economic fallouts from Trump's policies. The German economy and businesses will need to adapt to the potential changes in U.S. trade policies and economic growth under Trump, with a focus on diversifying export markets, investing in automation, and implementing countermeasures to support affected industries and workers.