Ifo: Six times more expensive for Germany the ‘trade war’ with China than Brexit

A possible European Union trade “war” with China would be up to six times more expensive than Brexit for Germany, estimates the Ifo Institute for Economic Research in Munich and suggests alternative ways to limit dependence on countries with authoritarian regimes.

“Deglobalization is making us poorer. Instead of moving away from important trading partners without sufficient reasons, companies should look for alternative partners in other countries in order to limit one-sided and critical dependencies on specific markets and authoritarian regimes,” emphasizes economist Lizandra Flach , head of the investigation, which was carried out on behalf of the Association of Bavarian Industry (vbw).

Especially in Germany, warns the Institute, those who will have the most significant losses will be the automotive industry (-8.47% in value added, -8.306 billion dollars), transport equipment manufacturing companies (-5.14%, -1.529 billion) and manufacturers mechanical equipment (-4.34%, -5.201 billion). “If Germany, as an exporting country, wants to redefine its business model, then repatriating supply chains is not a solution that will help the economy,” warns the Ifo, explaining that a more promising option would be to create strategic corporate relations and the conclusion of free trade agreements with like-minded countries, such as USA. “This should be the goal of German and European economic policy,” comments Florian Dorn, co-author of the survey.

Ifo studied five possible scenarios, including this one between Western countries and China, combined with an EU-US trade deal. Such an agreement could, according to experts, offset to some extent the negative effects of the withdrawal of the economies of Europe and China, but not annihilate them.