Economist Malmendier views 15% tariffs as a significant financial strain
In a recent interview on ARD's "Morning Magazine," economist Ulrike Malmendier, known as a "Wise Woman" in Germany, expressed concerns about the potential EU and US trade agreement. Malmendier, a professor in California, suggests that the proposed 15% tariff rate on EU imports could have significant impacts on individual companies and industries in Germany, Italy, and Ireland, among others.
According to Malmendier, a 15% tariff is "already a drama" and an "enormous burden" for parts of the German economy. The tariff mainly affects key EU exporters and sectors such as automotive, pharmaceuticals, semiconductors, industrial machinery, and agriculture.
Laura von Daniels, a trade expert from the German Institute for International and Security Affairs (SWP), agrees. She states that the EU Commission has a temporary reprieve from US President Donald Trump due to the agreement. However, she warns that the tariffs will lead to significant economic distortions, increased costs, and uneven impacts across sectors and countries, generally resulting in a GDP decline for the EU ranging from 0.2% to 0.8%.
One of the key potential economic impacts is increased costs for both EU exporters and US consumers. Tariffs distort trade and raise prices. Some EU exporters may absorb costs to maintain market share, while others pass tariffs fully onto US buyers, reducing demand but increasing US prices.
The euro's appreciation alongside the tariff exacerbates EU exporters' challenges in the US market, undermining their competitive position. The deal is also asymmetric and unbalanced, with the US imposing a 15% tariff on EU goods, while the EU has decided not to retaliate or increase its tariffs, potentially making the agreement disadvantageous for the EU economy.
The agreement, which includes provisions on investments and energy imports, also postpones contentious issues such as European service taxes, digital regulation, and artificial intelligence. The assessment of the overall economic impact is considered difficult to determine, but the longer-term economic outlook remains uncertain, especially given the distortionary effects of tariffs and potential shifts in exchange rates and consumption patterns.
In the past, tariffs of approximately one percent had been applied in the years and decades before. The deal provides the EU with valuable time to reduce dependencies, prepare for further conflicts with Trump and China, and better coordinate its goals and priorities. However, the potential economic impacts could be substantial, with some analysts projecting a reduction in EU annual GDP by approximately 0.2%.
In the meantime, German companies are benefiting from this temporary reprieve. The shift could potentially have a positive effect on inflation in the EU, but the long-term consequences for the EU economy remain uncertain. As Malmendier and von Daniels emphasize, while politically significant, the 15% tariffs pose risks of economic harm to the EU through higher trade costs, weaker competitiveness, and GDP losses, with complex effects depending on tariff pass-through and market dynamics.
- The community and employment policies within Germany, Italy, and Ireland, among others, could be impacted by the proposed EU and US trade agreement, due to the 15% tariff rate on EU imports which Ulrike Malmendier, an economist, considers a significant burden for parts of the German economy.
- The potential economic impacts of the EU and US trade agreement include increased costs for both EU exporters and US consumers, as tariffs distort trade and raise prices. These increased costs could potentially lead to a decline in the EU's GDP, with some analysts projecting a reduction of approximately 0.2% annually.
