Germany, Europe’s economic powerhouse, continues to hold the largest trade surplus with the United States among EU countries, even as its industrial sector faces significant challenges. However, this surplus could provoke tensions with US President Donald Trump, who has long criticized EU trade policies and threatened punitive tariffs.
Germany’s Trade Performance in 2024
According to data released by Germany’s Federal Statistical Office on Friday, the country’s exports fell by 1.0% in 2024 to €1.56 trillion ($1.62 trillion), while imports dropped more sharply by 2.8% to €1.32 trillion. The decline in exports weighed on the economy in the fourth quarter, though a rebound in December saw exports rise by 2.9% compared to November and by 3.4% year-on-year.
Despite these struggles, Germany recorded a record trade surplus of €71.4 billion with the US, its largest trading partner. Total trade between Germany and the US reached €255 billion in 2024, surpassing Germany’s trade with China, which stood at €247 billion.
Industrial and Automotive Sector Woes
The German Wholesale, Foreign Trade and Services Association (BGA) described 2024 as a “lost year” for German foreign trade, with little optimism for 2025. The BGA forecasts a further 2.7% decline in exports next year.
The automotive industry, a cornerstone of Germany’s economy, faces a particularly bleak outlook, alongside the struggling metal industry. Industrial production also fell by 2.4% in December, reaching its lowest level since the start of the COVID-19 pandemic. These trends highlight the challenges facing Germany’s export-driven economy.
Trump’s Tariff Threat
Germany’s substantial trade surplus with the US could exacerbate tensions with the Trump administration, which has repeatedly criticized EU trade practices and threatened to impose tariffs. Analysts warn that such tariffs could reduce Germany’s GDP by up to one percentage point and lead to significant job losses.
Klaus-Jürgen Gern of the Kiel Institute for the World Economy (IfW) noted that targeted tariffs on key German exports, such as cars, pharmaceuticals, and medical technology, would be particularly damaging.
Green Technologies and US Demand
A significant portion of Germany’s exports to the US has been driven by demand for “green technologies,” which were prioritized under the Biden administration’s climate policies. However, with Trump’s focus on rolling back environmental regulations and promoting fossil fuels, demand for these products is expected to decline.
German Finance Minister Advocates Negotiations
German Finance Minister Jörg Kukies suggested on Friday that engaging in negotiations with Trump could help avert a trade war. Speaking to Bavarian public broadcaster Bayerischer Rundfunk, Kukies pointed out that Trump has expressed interest in exporting more energy to Europe, which could serve as a basis for discussions.
Kukies also emphasized the need for the EU to pursue more trade agreements with countries such as the Gulf states, India, Indonesia, and Malaysia. He noted positive signals from these regions, highlighting their potential to benefit Germany’s export-oriented economy.
Broader Implications
Germany’s ability to maintain a trade surplus with the US amid industrial challenges underscores its economic resilience. However, the looming threat of US tariffs and the decline in demand for green technologies pose significant risks. As Berlin seeks to navigate these challenges, negotiations with the Trump administration and efforts to diversify trade partnerships will be critical to sustaining Germany’s economic strength.
The situation also reflects broader geopolitical dynamics, with the US and EU grappling over trade policies and economic influence. For Germany, balancing its relationship with the US while addressing domestic industrial weaknesses will be key to ensuring long-term economic stability
