Germany's growth slump sends early warning on trade war

Talk of a trade war remains just that but Europe's economy may already be showing the first signs of damage from a ri...

Posted: May 15, 2018 4:51 PM
Updated: May 15, 2018 4:51 PM

Talk of a trade war remains just that but Europe's economy may already be showing the first signs of damage from a rise in protectionist rhetoric.

Germany, the region's biggest economy and a global export power, posted quarter on quarter growth of just 0.3% in the first three months of the year. That's half the rate it achieved in the previous quarter.

"It appears that with last year's global trade surge fading and the specter of protectionism hanging over firms the German economy has passed its growth peak for now," said Oliver Rakau, chief German economist at Oxford Economics.

The quarterly GDP data was only a preliminary estimate, and the German statistics office did not provide a detailed breakdown of the economy's performance. But "less dynamic" foreign trade was a factor, it said.

Trade powers the German economy, with exports accounting for roughly 50% of GDP. The country has a huge trade surplus with the rest of the world, which has long been a source of irritation for President Donald Trump.

He has criticized Germany repeatedly for being "very bad on trade" and threatened tariffs on German car exports.

Trump's protectionist rhetoric has so far not translated into concrete policies aimed at Germany. He has imposed tariffs on European steel and aluminum imports, but those have been suspended until June.

Germany more at risk than most

But threats alone appear enough to have made a dent in Germany's growth, as businesses postponed investment decisions and factory output dropped -- and analysts are worried worse times could be ahead.

"If the US continues with its current approach and implements protectionist measures, Germany would be more at risk than most," said Jack Allen, European economist at Capital Economics. "It is a more open economy than most EU countries, and it also exports more than most outside the EU."

German exporters have also been hit by a rise in the euro, which makes their products more expensive in overseas markets. The euro hit $1.26 in February, its highest level since 2014, but has since fallen back to $1.18.

Related: UK economy grinds to a halt

The World Trade Organization warned last month that tariffs and other trade restrictions would inflict serious damage on the global economy. It urged Trump and other world leaders to "show restraint."

Florian Hense, an economist at Berenberg Bank, said the risk of more trade restrictions and uncertainty about the future relationship between the United States and Europe are hurting growth, even though the actual economic impact of the steel and aluminum tariffs Trump has threatened would be quite small.

"The real risk stems from the uncertainty about the future trade regime, as shown by the serious damage Brexit has done to the UK already," he added.

The UK economy grew just 0.1% in the first quarter, the second worst performance in Europe after Romania.

Related: Europe ready to hit back if Trump presses on with tariffs

Growth numbers for the eurozone showed similar downward trend on Tuesday. Germany is Europe's biggest economy and it tends to drive its growth.

The eurozone economy grew by 0.4% in the first quarter, compared to 0.7% in the previous quarter.

West Lafayette
Partly Cloudy
58° wxIcon
Hi: 83° Lo: 56°
Feels Like: 58°
Kokomo
Partly Cloudy
56° wxIcon
Hi: 83° Lo: 54°
Feels Like: 56°
Rensselaer
Clear
57° wxIcon
Hi: 82° Lo: 55°
Feels Like: 57°
Fowler
Clear
58° wxIcon
Hi: 82° Lo: 56°
Feels Like: 58°
Williamsport
Clear
56° wxIcon
Hi: 83° Lo: 55°
Feels Like: 56°
Crawfordsville
Clear
54° wxIcon
Hi: 83° Lo: 53°
Feels Like: 54°
Frankfort
Partly Cloudy
54° wxIcon
Hi: 82° Lo: 53°
Feels Like: 54°
Delphi
Partly Cloudy
56° wxIcon
Hi: 84° Lo: 56°
Feels Like: 56°
Monticello
Partly Cloudy
56° wxIcon
Hi: 83° Lo: 58°
Feels Like: 56°
Logansport
Partly Cloudy
55° wxIcon
Hi: 83° Lo: 54°
Feels Like: 55°
More sun, warmer temps with increasing humidity
WLFI Temps
WLFI Planner

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 775686

Reported Deaths: 14025
CountyCasesDeaths
Marion1066871814
Lake572681031
Allen43500701
Hamilton37653427
St. Joseph37508568
Elkhart29882471
Tippecanoe23732232
Vanderburgh23634405
Porter19690327
Johnson19020394
Hendricks18271323
Clark13730199
Madison13719348
Vigo12949256
Monroe12691180
LaPorte12645225
Delaware11218198
Howard10832237
Kosciusko9851124
Hancock8855150
Bartholomew8343157
Warrick8216157
Floyd8128183
Grant7457181
Boone7289105
Wayne7273201
Morgan6988143
Marshall6376117
Dubois6327118
Cass6130112
Noble607391
Dearborn605878
Henry6001111
Jackson520977
Shelby514898
Lawrence5020128
Gibson471697
Montgomery464792
Clinton462755
DeKalb461485
Harrison459277
Huntington429082
Whitley421045
Steuben414561
Miami411573
Jasper403957
Knox397291
Putnam388762
Wabash373884
Adams358956
Ripley354571
Jefferson351487
White341854
Daviess3110100
Wells305981
Greene298485
Decatur294393
Posey288235
Fayette287764
Scott285458
LaGrange278873
Clay277649
Washington257638
Randolph248583
Jennings243349
Spencer240531
Fountain239050
Starke231559
Owen226759
Sullivan224143
Fulton210446
Jay204132
Carroll200623
Orange194456
Perry193139
Vermillion183444
Rush179127
Tipton174348
Franklin173935
Parke157816
Pike144034
Blackford138732
Pulaski124748
Newton124137
Benton111615
Brown106743
Crawford106716
Martin92715
Warren88715
Switzerland8568
Union73910
Ohio58711
Unassigned0429

COVID-19 Important links and resources

As the spread of COVID-19, or as it's more commonly known as the coronavirus continues, this page will serve as your one-stop for the resources you need to stay informed and to keep you and your family safe. CLICK HERE

Closings related to the prevention of the COVID-19 can be found on our Closings page.

Community Events