Economy may speed up too quickly, according to Rich's warning
Germany's Federal Minister of Economics, Katherina Reiche, isn't banking on a full-blown economic recovery by 2025, expressing caution in a recent ARD Tagesthemen interview. The CDU politician emphasized that early signs of economic growth, particularly due to trade disputes with the USA, should not be misconstrued. Solid reforms, she insisted, are the key to a sustainable upswing, with the new federal government readying to initiate these reforms.
Bundesbank President Joachim Nagel earlier hinted at a slim chance of Germany escaping a third consecutive year without growth by 2025, suggesting a "slight improvement" in overall economic performance could be possible in annual averages. The initial quarter of 2023 showed double the anticipated growth, standing at +0.4%.
Economists generally predict that massive investments in infrastructure and defense will inject life into the economy no later than 2026. Reiche underscored the necessity of a swift recovery for Germany, as Europe's largest economic power must lead the rest of the continent out of economic doldrums.
Reiche's Stance on US Talks
During a USA visit, Minister Reiche emphasized the pressing need for a swift resolution to the trade dispute, stating that the continuous conflict costs the German economy millions of euros each day. With over 6,000 German companies operating in the US across all states, these businesses generate more than 900,000 jobs in the USA. The focus, according to Reiche, is on growth, investments, decent employment, and thriving value chains.
Her mission during her stay until Saturday is to bolster the EU negotiations, an especially delicate phase. To this end, she has held discussions with Finance Minister Scott Bessent and Trade Minister Howard Lutnick. Reiche remains optimistic about reaching an agreement before the July 9 deadline.
The Big Picture: Trade Dispute with the USA
The trade dispute between Germany (and the EU) and the USA remains complex, marked by ongoing negotiations fraught with tension, particularly regarding tariffs on steel, aluminum, and automobiles. Despite the uncertainty and financial losses, German officials remain hopeful for a swift resolution. The EU has temporarily suspended retaliatory tariffs on US goods worth €21 billion, awaiting the outcome of negotiations. If talks falter, additional countermeasures may follow.
Germany's economy, heavily export-oriented, stands to suffer heavily from prolonged trade disputes, particularly in sectors like automotive, chemicals, and steel. These disagreements could destabilize key sectors, impact growth, investment, and employment, and disrupt bilateral trade valued at around €253 billion. Finding a timely and collaborative solution is crucial to prevent further economic damage.
The ongoing trade dispute with the USA, involving contested tariffs on steel, aluminum, and automobiles, poses a significant challenge for Germany's economy, and could lead to financial losses and potential economic damage if not resolved promptly. Minister Reiche, during her visit to the USA, highlighted the need for a swift resolution to the dispute, emphasizing its detrimental effect on the German economy and the millions of euros lost daily.
