Trump's policy overhauls raise concern in Germany

BERLIN - Concerns have been raised in Germany over the potential impact of US President Donald Trump's policy overhauls on German economy and international trade relations.

German Vice Chancellor and Minister of Economics Robert Habeck has warned that Germany is prepared to impose retaliatory tariffs if the United States proceeds with new import duties on German products.

Speaking at the Handelsblatt Energy Summit in Berlin on Tuesday, Habeck emphasized the need for an independent approach to US trade relations under President Donald Trump.

Habeck said Germany should approach the new US government with "an outstretched hand" but not allow the hand "slapped away without limits". "We should not crawl in submissiveness," he added.

Trump, in his second term, has intensified pressure on key trading partners, reassessing global trade relationships. While threats of new tariffs have been issued, no formal measures have yet been introduced.

Habeck, also the minister in charge of Germany's climate action, took the opportunity to address the broader implications of Trump's climate policies, urging Germany and Europe to continue the leadership in developing low-carbon energy technologies, despite challenges posed by the US administration.

Marcel Fratzscher, president of the German Institute for Economic Research (DIW Berlin), highlighted that Trump's trade policies could deliver a "triple hit" to Germany: falling exports, a further slowdown in industry, and job losses.

"The German economy has already contracted for two consecutive years, and trade tensions would exacerbate the challenges of recovery," Fratzscher said. "Trade conflicts will also push up prices and intensify inflation, particularly hurting low- and middle-income households."

Germany's automotive industry faces new challenges as Trump's tax policies could encourage more automakers to shift production to the US, said Hildegard Mueller, president of the German Association of the Automotive Industry (VDA).

Mueller urged Germany and Europe to strengthen their independence and competitiveness.

She also cautioned that Trump's tariff policies could raise car prices in the US and hurt global automakers, leading to declining stock prices and worsening inflation.

"While Trump pledged to reduce inflation during his campaign, these tariffs could have the opposite effect, placing additional strain on the US economy and consumers," she added.

Moritz Schularick, president of the Kiel Institute for the World Economy, said that companies might relocate investments to the US to avoid tariffs, but this would lead to higher prices for US consumers and further inflationary pressure.