BERLIN, Sept. 19 (Xinhua) -- German economic momentum will weaken significantly in 2018 as a consequence of an escalating global trade war initiated by U.S. president Donald Trump, a study published on Wednesday by the German Economic Institute (IW) warns.
In the study, researchers at the politically right-leaning think-tank lowered their forecast for gross domestic product (GDP) expansion this year from 2 percent to 1.8 percent and from 2 percent to 1.4 percent in 2019 to account for the adverse impact of Trump's "America First" doctrine. The IW emphasized that international tensions over trade were "already palpable" in Germany with "exports falling and firms investing less."
Trump has recently said that an EU offer to phase out all tariffs on automotive products exchanged between the two major economic blocs was "not good enough." He added that "the European Union (EU) is almost as bad as China with regard to the unfair trade practices which he claims are used to exploit the world's richest country in global governance institutions such as the World Trade Organization (WTO).
The comments have sparked fears among German policymakers and business leaders of a renewed conflict between Washington and Brussels over trade after a short-lived cease fire secured earlier in negotiations by EU Commission president Jean-Claude Juncker.
On Tuesday, the Federation of German Wholesale and Foreign Trade (BGA) criticized a decision by the U.S. president to impose a further round of punitive import tariffs on Chinese goods worth 200 billion dollars as being damaging to the "foundations of the global economy"
Aside from protectionism, the IW also pointed to rising energy costs and weaker growth in emerging markets on Wednesday as factors which were currently weighing on the commercial prospects of German firms more than previously anticipated. These developments resulted in weaker profitability and exerted further downward pressure on exports and corporate investment.
On a more positive note, the study highlighted the continued strength of public and private consumption in Germany as a pillar of domestic growth. A healthy job market meant that German wages, and in turn spending power were still on the rise after seven consecutive years of GDP growth.
"Employment will continue to rise and the unemployment rate will fall to an annual average of around five percent in 2019", the IW predicted.
