In Germany, the biggest losers in the trade war with China are the automotive industry (-8.47 percent loss of value added; -8,306 million dollars), companies that manufacture transport equipment (-5.14 percent; -1,529 million dollars), and manufacturers of machinery and equipment (-4.34 percent; -5,201 million USD).
“If Germany as an exporting country wants to change its business model, moving supply chains to the country is not a solution that will help the economy. A more promising option would be to create strategic partnerships and free trade agreements with like-minded countries such as the United States. That should be the goal of German and European economic policy”, says Florian Dornstudy co-author.
The Ifo institute applied its trade model to the simulation of five scenarios, including the disengagement of Western countries from China combined with a trade agreement between the EU and the US. A trade agreement between the EU and the US could mitigate the negative effects of disengagement on the German and US economies, but not completely compensate for them. Given the expected benefits of the trade relationship with the US, the net costs would be similar to the projected costs of Brexit.
HT
Source: ifo Institute