China

The 90-day “tariff pause” between the US and China is expected to provide noticeable short-term relief, especially for the US economy. Simulations using the KITE model from the Kiel Institute for the World Economy indicate that inflationary pressure in the US may decrease. Current calculations suggest that prices will rise by around 4.3 percent in the short term, which is 1.2 percentage points lower than under the escalated tariff levels with up to an additional 145 percent tariffs from before.

The current trade war between the US and China is likely to weigh heavily on the US economy in particular. Inflation is likely to rise by over 5 percent and exports are likely to slump by almost 17 percent. The consequences for China itself are also considerable, but much less severe. Germany and the EU are hardly affected negatively. China's Asian neighbors and products such as Christmas decorations, dried fish, and electric blankets will face substantial additional competition on the global market. This is shown by simulations using the KITE model of the Kiel Institute for the World Economy.

Pursuing a European approach to international trade policy—the agenda of the Kiel Institute calls for a robust EU response to geopolitical tensions, protectionism, and economic uncertainties. China's dominance in key industries, the looming threat of U.S. tariffs under Donald Trump, and Europe’s waning competitiveness require a unified European strategy. A strengthened single market and a strategic trade policy—one that fosters openness, liberalization, and new partnerships, e.g. with Africa—are essential to bolstering Germany’s and the EU’s resilience while maintaining parity with the U.S. and China in the long term.