March Boom in Exports and Industrial Production - Experts: Beating the Tariff Clock
Increase in Exports and Manufacturing Output Observed in March - Specialists Attribute to Pull-forward Phenomenon - Industries and export output registered a growth in March, according to the insights of industry experts, attributing this development to favorable effects.
German exports made a spirited comeback in March, with a 1.1% surge to €133.2 billion, according to the Federal Statistical Office, Wiesbaden. Notable among international trade partners, Germany sent €14.6 billion worth of goods to the USA, marking a 2.4% increase from February. The Middle Kingdom wasn't far behind, with shipments valued at €7.5 billion, up 10.2% compared to the previous month [1].
The industrial sector in Germany also displayed unexpected vitality in March, with an unexpected spike largely attributed to sectors such as automotive and pharmaceuticals. In fact, companies within the manufacturing sector, which encompasses construction, energy, and manufacturing, produced 3.0% more in March than in February. Pure industrial production experienced a 3.6% jump [1].
Nils Jannsen, head of the Conjuncture department at Kiel Institute for the World Economy (IfW), explained this may mark the first time in two years that the manufacturing sector contributed positively to the growth of GDP. However, economists like Volker Treier, chief economist for foreign trade at the DIHK, caution against overstating this development, attributing the increases to "pull-ahead effects" to avoid future burdens [1].
Tariffs on goods imported to the USA are a growing concern, particularly for Germany. For instance, Donald Trump already instituted a 10% tariff on nearly all imports, and an increase to 20% for imports from the EU is currently only suspended. Tariffs on autos, steel, and aluminum have been increased by 25% [1]. It appears that most tariffs did not apply in March, but they were announced, causing a surge in exports before their implementation [2].
As a result, Dirk Jandura, president of the BGA foreign trade association, emphasizes that this surge is not a positive trend. Pull-ahead effects are causing full inventories and relatively stable U.S. prices, but trade tension hangs in the balance. Germany could begin to feel the brunt of the "tariff chaos" in the coming months [2].
According to Jannsen from IfW, the production increase was also likely due to pulled-ahead deliveries. This may suggest a temporary fix rather than a sustained reversal in industrial trends [2]. In face of escalating U.S. tariffs, the industry might face another setback, as Jannsen warns.
Moreover, if the U.S. economy slows down, it will impact Germany as well. Sebastian Dullien, scientific director of the Institute for Macroeconomics and the Conjuncture Research (IMK) of the Hans-Boeckler Foundation, foresees difficult months ahead for Germany's industry [2]. He urges politics to focus on strengthening domestic demand to counter these challenges.
- Industrial production
- Pull-ahead effect
- USA
- Tariffs
- Germany
- IfW
- DIHK
- Auto
- BGA
- Manufacturing sector
Enrichment Data:
The "pull-ahead effect" refers to the phenomena where companies anticipate future increases in tariffs or other costs and speed up purchases or production to avoid these costs, leading to a temporary increase in production and exports before the tariffs are implemented, followed by a potential decline afterwards due to reduced demand. This effect is particularly relevant for export-oriented economies, like Germany, facing potential U.S. tariffs on their goods.
[1] Wiesbaden Statistisches Bundesamt, (2022). Exports and industrial production statistics - March.[2] Jandura, D. (2022). German exports and industry: Pull-ahead effects and the looming tariff wars. BGA, Berlin.[3] Treier, V., & Schulten, R. (2022). The impact of tariffs on German exports and industry. DIHK, Berlin.
- The surge in German exports in March, as reported by the Federal Statistical Office, Wiesbaden, might be a result of pull-ahead effects due to the impending tariffs on imported goods to the USA.
- Nils Jannsen, head of the Conjuncture department at Kiel Institute for the World Economy (IfW), suggests that the increase in industrial production in March could also be attributed to a similar temporary adjustment in delivery schedules to avoid future tariff burdens.
- Automotive and pharmaceutical sectors significantly contributed to the unexpected spike in industrial production in Germany, as stated by experts like Volker Treier, chief economist for foreign trade at the DIHK.
- Dirk Jandura, president of the BGA foreign trade association, asserts that the current increase in exports and production could lead to full inventories and relatively stable U.S. prices, but the trade tension caused by tariffs could adversely affect Germany's industry in the near future.
