Ifo Institute: New US import duties on cars could reduce German car exports to the USA by 50% in the long term

This is the press release from the German think tank Ifo Institute:

German car exports to the USA could fall by almost 50 percent in the long term if the USA were to impose permanent import duties of an additional 25 percent. This is the result of the latest calculations by the Ifo Institute. “These tariffs would reduce total car exports from Germany by 7.7 percent, equivalent to 18.4 billion euros,” says Gabriel Felbermayr, director of the Ifo Center for International Economics. Exports from other sectors and to other countries could slightly cushion the overall economic loss, so that total German exports would fall only by 11.6 billion euros.

The value added of the automotive industry in Germany would fall by 7 billion euros, which would be a reduction of around five percent. The value added in the US car industry, on the other hand, would increase by around 25 billion Euro. The car exports of other countries would also be considerably affected by US customs duties; Mexico, Japan, Canada, Korea, and China should be mentioned in particular. Mexico and Canada could be exempted if their new agreement with the US came into force in time. In the EU, about 60 percent of the damage is attributable to Germany alone.

Felbermayr adds: “The EU can, however, develop a clever counterstrategy that would bring the effects of US tariffs on the economic performance of both sides to roughly zero. That would be tariffs on US products whose manufacturers would have to react with price reductions. This, in turn, would harm third countries whose economic output could fall by about five billion euros.” All calculations assume adjustment reactions, 90 percent of which take place within five years.

The US Department of Commerce is to present a report by Sunday at the latest on the question of whether the high level of car imports poses a threat to US national security.