According to the findings of a research, Berlin would have to pay more than the average cost for the block. Even in the event that a free trade agreement is reached with the United States of America.
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| [EU-China trade war] |
Berlin is worried that a trade war with China would result in extremely high costs for the country, which is already being put to the test by the gas crisis that was sparked as a direct result of the invasion of Ukraine. A decoupling of the European Union from the Asian superpower, which would require punitive measures by Beijing, would cost Germany about six times as much as leaving the European Union. The ifo Institute, working on behalf of the Bavarian Industrial Association, recently performed a scenario study, and the results point in this direction (Vbw).
If there were an open trade war between the United States and China, Germany would not be the only member state of the European Union to feel the negative effects. If Germany's GDP dropped by 0.81 percent, the rest of the European Union's GDP would drop by 0.53 percent. If the projection provided by the Ifo Institut is accurate, the economic impact of Brexit on the EU will result in a decline in GDP equivalent to 0.16 percent.
"De-globalization makes us poorer. Rather than moving away from major trading partners for no good reason, companies should source input from other countries as well. This will reduce the companies' reliance on certain authoritarian markets and regimes, which will help the companies become less dependent overall "according to Lisandra Flach, who contributed equally to the research study. The sectors of the German economy that stand to suffer the most from a trade war with China are the automotive industry (-8.47 percent loss of added value; -8.306 million dollars), the transport industry (-5.14 percent loss of added value; -1.529 million dollars), and the manufacturing sector (-5.14 percent; -1.529 million dollars) (-4.34 percent ; -5.201 million dollars).
"Onshoring of supply chains is not a viable strategy that would be beneficial to the German economy if the nation, which is mostly an exporter, wishes to realign its economic model. Establishing strategic relationships and agreements of free trade with related countries, such as the United States, would be a more hopeful course of action. This ought to be the objective of economic policy in Germany and across Europe, "According to Florian Dorn, who is also a co-author of the study:
According to Handelsblatt, China is by far the most significant trade partner for Germany: in 2021, the value of the items that were transferred between the two nations was almost 245 billion euros. The researchers from Ifo conducted a study in which they simulated five different scenarios. One of these scenarios included the uncoupling of Western nations from China in conjunction with a trade pact between the EU and the US. The EU-US trade agreement may be able to mitigate the adverse effects of the West's decoupling from China on the economies of Germany and the United States, but it will not totally eliminate such effects. The net expenses would be about on par with what is anticipated to be the cost of Brexit due to the anticipated improvements in trade ties with the United States.
The ifo Institute used its business model to simulate five different scenarios, one of which included the uncoupling of Western nations from China in conjunction with a trade deal between the European Union and the United States. However, the negative impacts of decoupling on the economies of Germany, Europe, and the United States may only be somewhat compensated by the trade deal between the EU and the US. The net costs would be about the same as those estimated for Brexit, taking into account the anticipated profits from trade ties with the United States. This is intended for Germany. The economic impact on the other member states of the EU, on the other hand, would be far less, amounting to 0.06 percent of GDP.