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US Reciprocal Tariffs and the Erosion of Global Trade Rules: Implications for Germany

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Listed:
  • Lisandra Flach
  • Lisa Scheckenhofer

Abstract

Key MessagesThe average tariff gap for traded products between the US and the EU is around 0.5 percentage points, which is relatively low compared to other US trade partners.US tariff changes aimed at closing the tariff gap between the US and the EU could affect 53% of German exports to the US and 6% of German global exports. While a wide range of products would be affected, the tariff increase would remain relatively small for three quarters of traded products, as their tariff gaps are below 2.3%.Our simulations show that higher US “reciprocal” tariffs reduce German exports to the US between 2.4% and 3.0% and decrease value added by 0.02%. These small effects for Germany, compared to scenarios with a flat 20% increase in US tariffs, are mostly due to the relatively low tariff gap between the US and the EU.However, the opposite scenario arises if the EU negotiates “full reciprocal tariffs” with the US – implying that the US also lowers tariffs when its own are higher. In this case, German value added and welfare increase.

Suggested Citation

  • Lisandra Flach & Lisa Scheckenhofer, 2025. "US Reciprocal Tariffs and the Erosion of Global Trade Rules: Implications for Germany," EconPol Policy Brief 71, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econpb:_71
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    References listed on IDEAS

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    1. Andreas Baur & Lisandra Flach & Dorothee Hillrichs, 2024. "German-US Trade Relations before the Election: Implications of a Trump Comeback," EconPol Forum, CESifo, vol. 25(05), pages 27-31, September.
    2. Lorenzo Caliendo & Fernando Parro, 2015. "Estimates of the Trade and Welfare Effects of NAFTA," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 1-44.
    3. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    4. Andreas Baur & Florian Dorn & Clemens Fuest & Lisandra Flach, 2025. "Geoeconomic Fragmentation and the Role of Non-Aligned Countries," Rationality and Competition Discussion Paper Series 526, CRC TRR 190 Rationality and Competition.
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