According to the Ifo Institute, economic decoupling from China and other countries would entail major losses in prosperity for Germany. On the one hand, sales markets would collapse, on the other hand, preliminary products and raw materials for German industry would become drastically more expensive, the economists write in a paper published in Munich on Monday and created under the leadership of Ifo President Clemens Fuest.

If the European Union (EU) were to be decoupled from China alone, it would hit German industry very hard and reduce its competitiveness, especially in car manufacturing and mechanical engineering. According to the Ifo calculation, higher import tariffs and other trade barriers on both sides would reduce German gross domestic product by 0.81 percent, which would cost a considerable proportion of overall economic growth. In addition, the Ifo researchers emphasize that these are only the lower limits of the losses to be expected. Accordingly, only comparatively small areas such as the textile industry would benefit.

The study also confirms previous Ifo studies that relocating industrial production to Germany or neighboring countries would mean enormous losses in prosperity. In the event of a comprehensive relocation to Germany, the German gross domestic product would fall by almost 10 percent. The paper states:

“Deglobalization could not only lead to higher unemployment and lower growth, but ultimately also endanger the political stability of the country.”

The biggest loser would be the automotive industry, according to the study published on Monday, entitled: Geopolitical challenges and their consequences for the German economic modelwhich was commissioned by the Bavarian Business Association (vbw).

Here there would be a loss of added value of around 8.5 percent or 8.3 billion US dollars. Companies that manufacture transport equipment (-1.529 billion US dollars) and mechanical engineering companies (-5.201 billion US dollars) would also be badly affected.

The Ifo Institute recommends reducing one-sided dependencies and diversifying supply chains. At the same time, however, it is emphasized: “The fact is, however, that we have to stick to our basic business model of internationalization,” says Bertram Brossardt, General Manager of the Bavarian Business Association. V. as the client of this study, added.

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Source: RT

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J. A. Allen

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