4 March 2025 – Yesterday, US President Donald Trump enacted the new punitive tariffs against goods from Canada and Mexico and doubled them to 20% against China. Germany relies on special assets: investments strengthen economy and defence.
US: punitive tariffs against China doubled to 20%
Yesterday, US President Donald Trump imposed new punitive tariffs on goods from Canada and Mexico. While Canada and Mexico were each hit with tariffs of 25%, President Trump doubled the tariffs against China from the original 10% to 20%.
He justified this by saying that China had not taken adequate steps to alleviate the illegal drug crisis. China had responded to the introduction of punitive tariffs by the United States with countermeasures and imposed tariffs on US goods in return.
Devaluation of foreign currencies against the dollar should stop
At the same time, President Trump warned that a devaluation of foreign currencies against the dollar in response to the US measures, as has happened with the Chinese yuan or Japanese yen in the past, could lead to further punitive tariffs in the future.
He also made it clear that Mexico in particular had endeavoured to accommodate the United States, but that the offers made so far were not yet sufficient to justify a further suspension of tariffs.
Will the UK and US reach an agreement in the trade dispute?
In contrast, an agreement could soon be reached with the United Kingdom in the smouldering trade dispute. Last week, President Trump praised British Prime Minister Keir Starmer for his negotiating skills and indicated that a deal between the US and UK on trade issues would be possible in the near future and that tariffs would therefore probably not be necessary.
Message from Washington not yet received in Brussels?
Looking at the reactions from Brussels, one might think that the message from Washington has not yet been understood and that Donald Trump could take a different approach towards the European Union. However, if the bureaucrats in Brussels stick to their rather uncompromising rhetoric and do stupid things, the EU could end up facing the same fate as China.
Germany relies on special funds: investments strengthen the economy and defence
Even before the new Bundestag is constituted at the end of March, further special funds totalling 800 to 900 billion euros could be approved. These are to flow specifically into infrastructure and defence and thus sustainably improve Germany’s economic and security policy framework.
Financial markets react positively: German government bond yields rise
The financial markets reacted positively: yields on German government bonds rose moderately, a sign of confidence in the sustainability of the measures. The euro appreciated by around one cent against the US dollar, while the DAX sent a strong signal with a record high of over 23,000 points. This development underlines the assessment that targeted investments can increase the country’s economic potential in the long term.
European defence sector also benefits
The European defence sector also benefited: shares in defence companies rose by more than six percent. The EU plans to procure at least 50 per cent of all military procurement within Europe by 2030. Studies show that a one per cent increase in defence spending can have a positive impact on economic growth in the long term. This strategic orientation promises not only short-term stimuli, but also a strengthening of Europe’s economic and security policy position.
Regardless of how these possible measures are ultimately assessed, they are likely to have a positive effect on the European economy.
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