What weakens Germany's exports?

February 24, 2020

Traditionally, exports are one of the main drivers of the German economy. German exports are concentrated mainly in industrial goods, investment products and transport equipment and parts. Consumer goods exports are less important (about a half the value of other exports). In 2019, total exports decelerated in nominal terms: available (10 month) data show exports growing at a rate of around 0.9% yoy, compared to 4.1% in the same period in 2018. This slowdown is due to the widespread reduction in exports from the most important industry sectors, to most economic areas and the EU28, in particular. 

The dataviz shows the value in euros (horizontal axis) and the growth rate (vertical axis) of German exports, for four macro-sectors (growth rates are computed on data available for the first 10 months). The dots/labels indicate export destination countries or areas (we selected the most relevant ones). For a given country, an upward/downward movement of the marker, indicates a better/worse export dynamic in 2019 compared to the previous year. Sector size is indicated by the horizontal position. 

 
 
 
 
 
 

In the last few years, US trade policy has threatened to impose or has imposed tariffs on many products from various countries, including China, and this has had important effects on German exports: 

  • it has introduced significant uncertainty in the global economy, which has reduced investment. This has had a major effect on exports due to Germany’s industry and export specialization in capital and investment products and industrial goods, on which many international value chains depend. German export trade has declined generally – and, especially, exports to the EU28;
  • the impact of the tariffs imposed by the US on Chinese imports has affected Germany: direct exports to China slowed due to China’s reduced industrial and investment activity (only consumer goods exports continued to grow), while the gap in supply has not been filled by German exports.

Also, for many reasons (i.e. dieselgate), Germany’s transport equipment and parts trade, was negative in 2018 and, so far, has not recovered. With the notable exception of exports to the US (which have increased significantly) both intra-EU and extra-EU trade  and global trade have worsened. 

It is highly likely that this weakness in German export trade will persist. Currently, the many factors producing uncertainty in the global economy could feed the weak global investment momentum: threats of new US tariffs remain in place – with the European automotive sector a possible target; although the UK has formally left the EU, the effects of Brexit remain unclear; and finally, the coronavirus Covid-19 crisis is likely to have a negative effect on economic activity and trade beyond China.