When Tariffs Hit: How Germany’s Exports Face the Heat

This week, I read about how German businesses are preparing for changes if Donald Trump becomes the U.S. president again. It’s an interesting topic that made me think about how other countries, like Taiwan, deal with global trade. Let’s me share about the article with you!

America is Germany’s biggest trading partner, importing $160 billion worth of goods last year. If Trump imposes higher taxes (called tariffs) on imports, it could make German goods like cars, machinery, and other exports much more expensive for American buyers.

• Big Companies: Major companies like BMW, Volkswagen, and Mercedes-Benz might manage these changes better because they already have large factories in the U.S. For example, BMW’s factory in South Carolina produces cars not only for the U.S. but also for export. This could help them avoid some of the costs of tariffs.

• Smaller Companies: On the other hand, smaller German manufacturers—called the Mittelstand—may struggle. Many of them don’t have factories overseas and rely on exporting their products directly from Germany. Tariffs would make their goods less competitive, leading to fewer sales and profits.

• Investments in the U.S.: To reduce risks, some German businesses have already increased investments in America, building factories to produce goods locally. This strategy helps them avoid high tariffs and continue selling to American customers.

  Difference Between Tax and Tariff

  • Tax: A tax is a financial charge imposed by a government on individuals, businesses, or goods to fund public services like schools, roads, and healthcare. Taxes are usually applied domestically, such as income tax or sales tax.

  • Tariff: A tariff is a specific type of tax, but it is only applied to goods imported from other countries. The goal of tariffs is often to protect local businesses by making imported goods more expensive or to generate revenue for the government.

  For example:

  • Tax: If you buy a product in Taiwan, you might pay a 5% sales tax on it.

  • Tariff: If Taiwan imports machinery from Germany, the government might charge a 10% tariff on those imports to make local machinery more competitive.

  After reading this article, it made me think about how Taiwan might face situations similar to Germany. Here are some questions for you to reflect on:

  Questions to Think About

• How do tariffs affect prices?

  • How might customers react to higher prices?

  • Can businesses lower costs or make their products more valuable?

• Why can big companies adapt better?

  • Do big companies have more money and resources?

  • Can they move factories or change strategies more easily?

• What can Taiwan learn from Germany?

  • Could building factories overseas reduce risks?

  • Which Taiwanese industries might benefit most from this strategy?

I’d love to hear your ideas on how Taiwan’s businesses can adapt to changes like this!