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(Bloomberg) — Germany’s global export position has deteriorated substantially in recent years, according to research by the Bundesbank, which blames structural issues rather than President Donald Trump’s tariff spree.
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Market shares in international trade have been declining since 2017, with the drops accelerating from 2021, economists Philipp Meinen and Arne Nagengast wrote in an article published Monday. More than three-quarters of the losses between 2021 and 2023 were due to a slump in competitiveness.
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Had German exports tracked the growth of overall sales in foreign markets, output would have risen by 2.4 percentage points more between 2021 and 2024, the researchers found. Instead, Europe’s largest economy has shrunk for two straight years and may contract in 2025 and 2026 if talks with the US fail, the Bundesbank predicts. Trump says the European Union will face 30% tariffs from Aug. 1 if a better deal can’t be reached.
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Chancellor Friedrich Merz has warned levies like that would rock German exporters “to the core” and could reshape his economic plans. Scaling back some of those could aggravate what the Bundesbank found were widespread losses in competitiveness that spanned many sectors and were high by international standards.
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“This points to fundamental structural problems in the German economy that have weighed on many companies,” Meinen and Nagengast wrote, citing, post-pandemic supply-chain disruptions, higher energy prices, China’s emergence as a global competitor, demographics, bureaucracy and taxes.
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“There’s a need to improve supply conditions in Germany,” the researchers said, suggesting fixes that include:
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- Better work incentives
- Lower barriers to skilled migration
- Higher tax incentives for private investment
- Improved conditions for start-ups and research and development
- Benefits reforms
- Progress on the energy transition
- New free-trade agreements
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While some government initiatives are moving in this direction, more is needed, the researchers said.
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