Photo: Chinese stock prices on a treadmill, via dts
Munich (dts) – A decoupling of the EU and Germany from China, which would result in retaliatory measures from the Chinese side, would probably cost Germany almost six times as much as Brexit. This is the result of a scenario analysis by the Ifo Institute on behalf of the Bavarian Business Association (VBW), which was published on Monday.
“De-globalization makes us poorer,” said study co-author Lisandra Flach. “Companies should not turn away from important trading partners without necessity, but instead rely on advance payments from other countries in parallel in order to reduce one-sided and critical dependencies on certain markets and authoritarian regimes.” According to Ifo, the biggest losers in a trade war with China would be the automotive industry, companies , which manufacture transport equipment, and mechanical engineering. “If Germany as an export nation wants to realign its business model, the nationalization of supply chains is not a solution that will help the economy,” said Florian Dorn, co-author of the study.
It is more promising to conclude strategic partnerships and free trade agreements with like-minded nations such as the USA. “That should be the goal of German and European economic policy.” Five scenarios were simulated as part of the study, including the decoupling of Western countries from China, combined with a trade agreement between the EU and the USA. A trade deal between the EU and the US could cushion the negative effects of the West’s decoupling from China on the German and US economies, but not fully offset them.
Due to the expected gains in the trade relationship with the USA, the net costs would be at a similar level to the expected costs of Brexit.
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