German Steel Industry Faces Billions in Costs Due to Trump Tariffs

The announcement of new tariffs by former U.S. President Donald Trump on steel and aluminum imports threatens to significantly impact the German economy. Industry experts warn that these levies could jeopardize jobs and economic prosperity in Germany.

On February 10, Trump declared a 25% tariff on steel and aluminum imports to the United States, a move reminiscent of previous trade disputes. His administration's rationale centers around a retaliatory stance: "If they charge us, we will charge them back." As a result, this decision raises questions about the ramifications for international trade relations and the potential for a severe cost impact on the European and German steel sectors.

In response, the European Commission is preparing countermeasures. Ursula von der Leyen, the President of the European Commission, has expressed confidence that the EU will take necessary actions to safeguard its economic interests, ensuring protection for workers, businesses, and consumers alike.

The tariffs predominantly affect businesses within the industry. According to the Steel Economic Association, the EU exported about 4 million tons of steel to the United States in 2023, with Germany contributing approximately 1.1 million tons valued at $2.1 billion in 2024. This volume represents about 18% of all steel exports from the EU to non-EU countries.

However, the timing of these tariffs could not be worse, as they impose significant challenges on the European steel industry. Gabriel Felbermayr, a noted economist, suggests that while the economic repercussions for the EU may not be catastrophic, the tariffs will still impose an estimated cost of 0.03% of the gross domestic product on Germany, translating to a potential loss of around EUR1.2 billion. Conversely, the U.S. could also experience losses amounting to EUR12 billion, which would represent a 0.04% hit to its GDP.

Despite this, the U.S. steel industry has welcomed the tariffs. Leaders from the sector believe that these measures will curb foreign dumping practices and stimulate domestic production. Historical comparisons indicate that during Trump's initial implementation of tariffs in 2018, U.S. steel manufacturers increased production and employment as a direct result.

Nevertheless, the rising costs associated with these tariffs have adversely affected downstream industries in the U.S., leading to reduced demand and job losses among those sectors. Data suggests that EU exports of steel to the U.S. halved from 5.2 million tons in 2018 to 2.5 million tons by 2020 following the earlier tariffs.

In light of these developments, Wolfgang Niedermark, the Chief Executive of the Federation of German Industries (BDI), has urged for negotiations rather than hasty retaliatory measures against the U.S. He emphasizes that escalating a trade war would threaten jobs and prosperity in Germany and warns that similar consequences could unfold in Canada and Mexico, both of which have vocally opposed the new tariffs but received little response from the Trump administration.

As the situation unfolds, the European Union must carefully consider its next steps to address the challenges posed by these tariffs while seeking constructive dialogue to mitigate the potential fallout for its industries.