In the past 12-months, President Donald Trump cautioned the export machine called Germany about its lack of spending on the military and its unfair trade practices with the United States. He has not been a friend of the German Leader, Angela Merkel who, looks at Trump as a fool and a spoiled child ranting and throwing his toys around. However, Germany is massively reliant on the international market, focuses in exports and as a result is in a situation that, with a slowing of the European economy and increasing populism, is in a weak position. Germany just posted its third-quarter growth data which reported a 0.2 percent quarter-on-quarter shrinkage. This is not good for an already weakened Merkel and her party that have suffered setbacks in recent elections.
This is the first economic shrinkage in Germany since the first quarter of 2015.
Car production in Germany is a big business, a massive export business. The production numbers for September fell by 24 percent – from the same month a year before, according to the German Association of the Automotive Industry (VDA). First the political situation started to fade and Merkel stated that she would not seek another term, raising questions in Germany and abroad. However, this political strain took the economy to a new level, a lower level as confidence in this once mighty economy is fading, and fading fast. How can, with a global economy slowing, the German exporters move aggressively to support growth?
For now, President Trump has delayed a decision on whether to impose tariffs on European car importers – so the timing of the German GDP slowdown, especially driven by autos, is a concern for German leadership.
Downside risks are increasing……