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The US election has enormous significance for the German economy. A Trump victory would change a lot. Companies should act, demands expert Marc Kloepfel.
Washington, DC – The US election is a directional decision that goes far beyond the USA. The appearance of the new president is particularly important for international trade. The export-oriented German economy is particularly looking at possible tariffs, which would be a further setback in international trade. Donald Trump is particularly in focus, while Kamala Harris stands for a continuation of previous policies.
During the election campaign, Trump campaigned on introducing tariffs of 60 percent on products from China. For goods from other countries, these should be between ten and 20 percent. For the presidential election, he is bringing back memories of his first term in office. This was a sticking point for global trade. “Eight years ago, companies were certainly poorly positioned when it came to supply chain resilience. “In the end, everything went in the direction of global sourcing: increasingly cheaper, ever further away and just in time,” said Marc Kloepfel, an expert in supply chains, purchasing and logistics, in an interview with IPPEN.MEDIA.
Trump was the first blow to global trade – rising prices the consequence
“Then Donald Trump came along and shook things up for the first time with his America First policy, on the one hand through tariffs on imports into America, and on the other hand through export restrictions out of America,” said Kloepfel. “The problem is that the supply chains were completely linked to one another.” A German company bought a product from Mexico, for example China came and had a value chain in the USA. “If trade wars start between certain regions, the entire network is affected.” In addition, the corona pandemic, the war in Ukraine and the Middle East conflict would have put a strain on supply chains.
Donald Trump is promoting high tariffs before the US election and could cause the economy to wobble. © Carlos Osorio/dpa
The consequences: “All of these tendencies create shortages and rising prices in the logistics sector,” warned Kloepfel. Experts fear that a second term in office for Donald Trump will exacerbate the problems. According to an analysis by the Hans Böckler Foundation, Trump’s tariffs would be a “further negative shock” for the German economy, with growth losses of one percent in the first two years.
The trade barriers imposed by the USA and possible reactions from the EU could cost the German economy up to 180 billion euros, said the German Economic Institute. Sectors focused on foreign trade such as the automotive industry, the pharmaceutical industry, mechanical engineering and the chemical industry would be particularly affected. “As good as the location conditions are for companies in the USA, the prospect of additional new trade barriers and supply chain disruptions dampens optimism,” said Volker Treier, head of foreign trade at the German Chamber of Commerce and Industry (DIHK), shortly before the US election.
Threatening consequences of the US election: Companies should check supply chains – demands expert Marc Kloepfel
According to the association, companies should prepare for the threat of tariffs. “If Donald Trump comes back and takes the same approach as eight years ago, it is certainly important that companies continue to diversify their supply chains,” said supply chain expert Marc Kloepfel IPPEN.MEDIA. However, he does not expect a similar shock to Trump’s first term in office. “I think the effect is no longer as bad as it was eight years ago because companies are simply better prepared.”
“The most important thing from a company perspective is to assess what they buy and where,” said Kloepfel, citing one option for companies. They should check what they source in and outside Europe. “You should draw up a corresponding risk analysis for each of these groups,” said Kloepfel. “You should calculate scenarios and consider what hedging mechanisms are available if the risk is too great. If the problems arise in China and the USA and Chinese products are less available, they should have alternatives.”
The expert is already observing and checking what they can produce themselves in order to be less dependent. “You should of course also look at how you can strengthen local procurement,” said Kloepfel.
“Europe First” policy against Donald Trump to protect our own economy?
Politics also has a responsibility. “We should oppose a Europe First policy and set up appropriate subsidies and help companies for products where there are dependencies or where there are no longer any delivery options, which could lead to the entire industry being idle,” demanded Kloepfel. Products that have become scarce due to trade conflicts must be identified and invested in the industries – even if it is cheaper to buy them in Asia. “Purely from a risk perspective, we must also have appropriate technologies in Europe in order to be protected in an emergency.”
However, the main problem with strengthening production in Germany is the high energy prices, “which is no longer sustainable for energy-intensive production,” said Kloepfel. This makes it more difficult to shift back energy-intensive steps in the value chain.
Kamala Harris is continuing protectionist economic policies after the US election, warns Kloepfel
According to Kloepfel, it is not just Trump who would also implement protectionism in economic policy. He points out that under Joe Biden only relatively few regulations were withdrawn by Trump. “Under Harris, everything will certainly not change completely,” said Kloepfel. “Trump will certainly use different rhetoric and add a little more fuel to the fire, which would perhaps be less under Harris. But nevertheless, one must assume that the USA will continue to pursue a protectionist course.”
Alternatives are important. “That’s exactly why it’s important that companies always have two or three strategies in parallel and not focus on one strategy,” said the consultant. The last eight years have made companies significantly more intelligent.
