Moritz Schularick, president of the Kiel Institute for the World Economy, estimated that the tariffs would reduce German economic growth by 0.5% in the coming year, describing it as “manageable” but still a dampening factor. Similarly, Hermann Simon, an economist who coined the term “hidden champions,” noted that the tariffs act as “structural disruptors” to tightly interwoven supply chains, impacting German manufacturers like Tornado Antriebstechnik GmbH, which faced increased costs and halted U.S. expansion plans.
German officials and economists have consistently highlighted the challenges posed by these tariffs, particularly for Germany’s export-driven economy, which relies heavily on the U.S. as a trading partner. The German government slashed its 2025 GDP growth forecast to zero, citing U.S. tariffs as a significant factor, with the German Economic Institute estimating a potential cumulative cost of €290 billion by 2028 if tariffs persist.
The Kiel Institute estimates a 0.5% drop in German GDP growth for 2025 due to tariffs, with the German Economic Institute projecting a cumulative €290 billion loss by 2028 if tariffs persist. Germany’s automotive industry, which exports €26 billion annually to the U.S., faces higher costs, with companies like Volkswagen and BMW potentially passing these onto consumers or absorbing losses, reducing competitiveness. Other sectors like machinery (€21 billion) and chemicals (€18 billion) are also hit hard.
Tariffs disrupt integrated supply chains, particularly for mid-sized manufacturers. For example, Tornado Antriebstechnik GmbH halted U.S. expansion due to cost increases, as noted by economist Hermann Simon. The German government cut its 2025 GDP forecast to zero, citing tariffs as a major factor. Exports to the U.S. are expected to decline, with estimates suggesting a 10-15% drop in affected goods if tariffs remain.
Retaliatory EU tariffs or a broader trade war could further depress German exports, with China’s slowing demand adding pressure. The German Economic Institute warns of a potential 20% export drop to the U.S. in a worst-case scenario. Tariffs raise the price of German cars exported to the U.S., Germany’s largest auto export market (10% of total auto exports). For example, Volkswagen and BMW face higher costs, potentially increasing U.S. car prices by 5-10% or squeezing profit margins if absorbed.
Higher prices weaken German automakers’ edge against U.S. and Asian competitors. The German Economic Institute (IW) estimates a potential 10-15% drop in U.S. auto exports if tariffs persist. The industry’s integrated supply chains face disruptions, as components crossing borders incur additional costs. Mid-sized suppliers, like those producing parts for Mercedes or Porsche, are particularly vulnerable, with some halting U.S. expansion plans (e.g., Tornado Antriebstechnik GmbH).
The German Association of the Automotive Industry (VDA) warns of potential job losses, with up to 50,000 jobs at risk in a severe scenario. Investment in U.S. plants, like BMW’s South Carolina facility, may stall due to uncertainty. The tariffs contribute to Germany’s slashed 2025 GDP forecast (0% growth), with the auto sector’s struggles amplifying economic stagnation. A trade war with retaliatory EU tariffs could further cut exports by 20%, per IW estimates.
The tariffs raise the cost of German EVs exported to the U.S., a key market for manufacturers like Volkswagen, BMW, and Mercedes-Benz. For example, models like the VW ID.4 or BMW i4 could see price hikes of 5-10% in the U.S., reducing affordability and demand. Alternatively, absorbing tariffs cuts profit margins, straining finances already stretched by EV R&D investments.
German EVs face heightened competition from U.S.-made EVs (e.g., Tesla, Ford Mustang Mach-E) and Asian manufacturers not subject to similar tariffs. The German Economic Institute (IW) estimates a potential 10-15% drop in German EV exports to the U.S., with luxury brands like Porsche (Taycan) and Audi (Q8 e-tron) particularly affected due to their premium pricing.
EV production relies on complex global supply chains, including batteries and components. Tariffs increase costs for imported parts, disrupting suppliers like ZF or Continental. Smaller firms may struggle, with some, like Tornado Antriebstechnik GmbH, already halting U.S. expansion, as noted by economist Hermann Simon.
The EV sector’s struggles contribute to Germany’s zero-growth GDP forecast for 2025. A potential EU-U.S. trade war with retaliatory tariffs could further slash EV exports by up to 20%, per IW estimates, exacerbating pressure from China’s slowing demand and competition from Chinese EV makers. Higher U.S. prices may dampen EV adoption, conflicting with U.S. and EU climate goals. German manufacturers may shift focus to markets like the EU or China, but global oversupply and China’s competitive pricing limit relief.
