US "reciprocal" tariffs and the erosion of global trade rules : implications for Germany

US President Donald Trump proposed implementing "reciprocal tariffs", under which the US would raise import tariffs to match those imposed by its trading partners, further undermining the multilateral rules-based system. This policy brief examines the status quo of tariff differentials between the US and the EU and explores the implications of this policy for the German economy should it be implemented. The results indicate negative effects on both German exports and value added if "reciprocal" tariffs are introduced and/or if trading partners retaliate. German exports to the US fall by 2.4% to 3.0%. These relatively small effects for Germany compared to a scenario with an across-the-board 20% increase in US tariffs on all trading partners are mainly due to the relatively small tariff gap between the US and the EU compared to the larger gaps between the US and other trading partners.