Weak German Trade No Sign of Long-Term Slowdown

The seasonally adjusted trade balance was unchanged at €21.3 billion ($26.21 billion), the data showed. The figures come one day after industrial orders slumped by a more than expected 3.9% in January.

“The weak start to the new year is nothing new for the German economy,” Carsten Brzeski of ING Diba said in a note to clients. “It is a phenomenon witnessed more often in recent years that German economic data has been overly sensitive to seasonal effects and vacation planning,” Euronews reported.

Unusually warm weather in January resulted in activity in the energy sector falling by 3.3%. Construction sank by 2.2%, a breakdown of the output data showed. Manufacturing output was hampered by workers’ strikes.

“We expect production to rebound in February,” Stephen Brown of Capital Economics wrote in a note. “After all, unseasonably cold weather will have boosted energy output and, more generally, the business surveys paint a positive picture of underlying conditions.”

The prospects for the German economy look rosy, with capacity utilization at its highest level since 2008 and companies reporting full order books.

US President Donald Trump’s import tariffs are one of the main risks for Germany, which last year exported more to the United States than any other country.

“Some darker clouds have appeared at the German economic sky,” said Brzeski, referring to Trump’s steep tariffs. “New protectionism would definitely hurt the self-proclaimed export world champion.”

German Economy Minister Brigitte Zypries told her US counterpart in a letter on Thursday that the tariffs could prompt other countries to use national security as a reason for introducing trade restrictions, which would undermine global trade rules.

But Dieter Kempf, president of Germany’s BDI industry association, said he did not believe the era of free trade was over after Trump’s announcement of tariffs on steel and aluminum imports.

He said the European Union, which has threatened to impose its own tariffs on US imports in retaliation, should not over-react to Trump’s measures. But “the US needs to feel some pressure”, he added, urging dialogue to avoid an all-out trade war.

  Trump Defies Allies

Trump defied opposition from his own party and protests from overseas as he signed orders on Thursday imposing stiff and sweeping new tariffs on imported steel and aluminum. But he sought to soften the impact on the United States’ closest allies with a more flexible plan than originally envisioned.

After a week of furious lobbying and a burst of last-minute internal debates and confusion, Trump agreed to exempt, for now, Canada and Mexico, and held out the possibility of later excluding allies like Australia. But foreign leaders warned of a trade war that could escalate to other industries and take aim at American goods.

“The actions we are taking today are not a matter of choice; they are a matter of necessity for our security,” Trump said in a ceremony at the White House where he officially authorized the tariffs, which will go into effect in 15 days.

The United States is the largest steel importer in the world and the order could hit South Korea, China, Japan, Germany, Turkey and Brazil the hardest. Trump said his tariff orders were tailored to give him the authority to raise or lower levies on a country-by-country basis and add or take countries off the list as he deemed appropriate.