Trump’s Return – The Impact on the Economies of Germany, Europe, and Georgia

German Chancellor Olaf Scholz has dismissed Finance Minister Christian Lindner, leading to the collapse of the three-party coalition and plunging Germany’s political governance into uncertainty. This political crisis, combined with Trump’s return, presents certain challenges to the economic stability of Europe. The disbanding of the coalition affects not only Germany’s internal politics but also has serious implications for the stability of the entire European Union, as Germany is one of the EU’s main economic and political leaders.

Germany, which is the primary engine of the European economy, is now facing a dual challenge. Political instability and economic weakening could lead to certain economic difficulties, complicating the overall economic situation in Europe. Against this backdrop, Trump’s policy presents specific challenges for Europe, requiring a consolidated and pragmatic approach.

Trump’s administration, which ensured economic growth in America primarily by restricting imports and imposing tariffs on European and Chinese products, posed a significant challenge to the European economy. According to the Munich-based Ifo Institute for Economic Research, Trump’s 20% tariffs on European imports could reduce German exports, negatively affecting its economic strength. Germany’s industry, which heavily relies on exports, is now facing certain risks that pose challenges to the entire European economy.

Industry and Production: Imposing tariffs is a particularly big challenge for Germany, where industry and export-oriented production play a crucial role. About 15% of Germany’s exports go to the United States, meaning that increased tariffs could result in a loss of around 33 billion euros. This will impact sectors such as automotive and chemical manufacturing, which are already competing with Chinese companies.

Automotive Industry: Germany’s automotive industry, one of the world’s leading sectors, will especially feel the impact of Trump’s tariffs. The US market represents a significant portion of German car sales, and increased tariffs would reduce sales. According to Ifo forecasts, German automakers could see their profits fall by about 20%, leading to job cuts and reduced investment in research and development.

Energy: Trump’s policies also impact the energy sector. During Trump’s administration, the US began exporting more energy resources, creating the need for Europe to seek alternative energy sources. Energy security is particularly important for Germany, which imports a large part of its energy resources. Rising energy prices will affect production costs and, consequently, the prices of final products.

Small and Medium-Sized Businesses: Increased tariffs and economic instability also pose challenges for small and medium-sized businesses that are heavily reliant on exports. These businesses often lack the financial resources to withstand higher tariffs and shrinking markets, which may lead to a reduction in their operations.

Under these circumstances, European countries, particularly Germany and France, which must play a key role in European unity, are compelled to focus more on internal political issues and develop a unified plan in the shortest possible time to address both economic and security challenges.

Internal Challenges in Germany: Current developments in Germany indicate that the country is far from the consensus model that existed during Angela Merkel’s time. Political fragmentation and party diversity make it difficult to form a stable coalition, complicating the economic situation and adding to the challenges posed by Trump. Against this backdrop, German industry is already experiencing difficulties as competition from China and other markets intensifies. Cheap, high-quality products from China create serious challenges for German manufacturing, weakening their position in the local market. This exacerbates the crisis in the industry and leads to further job losses.

The Need for Economic Reforms in Germany: The market losses and internal economic problems faced by German industry in recent years indicate that the country’s economic model needs reforms and innovative approaches. The worsened situation in Germany’s automotive industry, connected with competition from Chinese electric vehicles, has already led to large-scale job cuts. Similar challenges are emerging in other sectors, creating the risk of economic stagnation for Germany.

Impact on Georgia: Amidst this crisis, it is important for Georgia to consider that political and economic instability in Germany and Europe, in general, may affect its trade relations and economic ties. US-imposed tariffs and a weakened European economy will impact Georgian exports and foreign investments. For Georgia, which often relies on the stability of European markets, this situation poses serious challenges. At the same time, instability in European markets threatens the country’s economic growth and development, as some European investments may decrease or be partially halted.

The political crisis in Germany and the strained trade relations between Europe and the US during Trump’s administration create a complex and uncertain situation not only for Germany but for the entire European Union. Georgia, as part of the global economic system, will be forced to adapt to the new conditions and strengthen its economic ties with Europe and other countries to reduce risks and ensure economic stability.