US market of major importance for individual sectors of German industry

In recent weeks, much has been written about whether the election of Donald Trump as 45th President of the United States would impact negatively on German foreign trade with the USA. After all, the US is the most important export destination for Germany and statements by Donald Trump on world trade and possible punitive tariffs for imports into the US could perhaps give grounds for concern.

Last year, German companies delivered goods with a total value of almost EUR 107 billion to the US, amounting to 8.9 percent of total German exports. However, exports to the USA were a full 6.4 percent down on the prior year. It was the first decline since the financial crisis. By contrast, globally speaking German exports increased 1.2 percent in 2016. The greater demand arose above all among European Union member states (+2.2 percent). The decrease in German goods exports to the USA last year cannot be explained purely by pointing to the presidential election. Exports in November, the election month, were 2.8 percent up on the prior-year month.

The diesel exhaust scandal presumably hit the foreign trade statistics far harder. In 2016, exports of cars and automotive parts from Germany to the USA dropped over 14 percent on the year. Nevertheless, the sector still accounts for almost 28 percent of total German exports to the United States and thus remains the single most important branch of industry for trade with the USA. That said, in 2015 the auto industry’s share of total German exports to the USA was appreciably higher than it was last year.

Well behind the carmakers follow mechanical engineering and the pharma industry as the next most important exporters to the US. In 2016, unlike the auto industry both sectors slightly expanded their share of total exports to the US on the prior year. Since pharmaceutical sales are as a whole far lower than those for mechanical engineering and carmakers, the industry is essentially more exposed to US demand patterns. Taken together, these three sectors alone account for more than half of all German exports to the US. If one includes “manufacturers of data-processing equipment and electrical and optical devices”, producers of other vehicles, and the chemicals industry, then one actually arrives at a figure of more than three quarters of all German exports to the US.

The classic export-oriented industrial companies are thus strongly involved in the United States, even if we discount local production facilities. Goods destined for the US market that German corporations produce in the US are not included in the foreign trade statistics. However, they would also not be hit by punitive tariffs for imports to the USA. Things could be problematic as regards plants in Mexico if Donald Trump does renegotiate the NAFTA free-trade zone.

The German sectors defining exports to the USA are also the major importers of US goods. The car industry accounted for over 12 percent of imports from the US in 2016, a figure slightly up on 2015’s level of 11.4 percent. In other words, the German auto industry is now up alongside “manufacturers of data-processing equipment and electrical and optical devices” and the pharma sector. These three sectors alone absorb over 38 percent of US imports to Germany.

In order to remain successful in trade with the USA, German companies must continue to sharpen their competitive edge. In the final instance this applies to all companies where exports have a clear significance for total sales. Successfully tapping alternative sales regions depends on German goods being competitive. Moreover, demand in the emerging markets remains comparatively sluggish and a return to the decidedly dynamic growth rates seen before the financial crisis is not to be expected in the long term either.

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