German exports fell more than expected in May, data showed on Tuesday, after the positive impact from companies rushing to beat U.S. tariffs waned.
Exports from Europe's biggest economy fell by 1.4% in May compared with the previous month, data from the federal statistics office showed. That compared with a Reuters poll forecast for a 0.2% decrease.
Exports to the United States dropped 7.7% in May month on month, following a 10.5% decline in April.
A baseline U.S. tariff of 10% came into effect on April 5 but analysts said this had only had a modest impact.
Given that trade is back at January levels, the declines in April and May were mainly due to a reversal of frontloading seen in February and March, said Carsten Brzeski, global head of macro at ING. Exports to the U.S. had risen 8.5% in February compared to the previous month and 2.4% in March on the previous month.
"The 10% tariffs should be manageable for German exports, given that they are often in less price-sensitive sectors," Brzeski said.
The strengthening of the euro against the U.S. dollar and other currencies is adding to exporters' concerns, he said.
Compared with May 2024, exports to the United States were down 13.8% on a calendar and seasonally adjusted basis in May this year.
"If the EU and the U.S. do not reach an agreement that largely prevents higher U.S. tariffs – which does not seem likely at present – it can certainly be assumed that exports to the U.S. will continue to decline in the coming months," said Ralph Solveen, senior economist at Commerzbank.
The macro data for the first two months of the quarter suggest the German economy is set for yet another stagnation or even small contraction in the second quarter, Brzeski said.
"The effect of the 10% tariff is most probably modest, as no country has got a comparative advantage, given that imports from all countries are burdened with this tariff," Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said.
Still, the U.S. was Germany's biggest trading partner in 2024 with two-way goods trade totalling 253 billion euros ($277.84 billion).
U.S. President Donald Trump has set a July 9 deadline for the 27-bloc European Union and other trading partners to reach trade deals and avert steep tariffs.
The EU still aims to reach a trade deal by Wednesday after European Commission President Ursula von der Leyen and Trump had a "good exchange," a Commission spokesperson said.
"If we don't reach a fair trade deal with the U.S., the EU is ready to take counter measures," German Finance Minister Lars Klingbeil said on Tuesday, speaking in the lower house of parliament.
Germany's foreign trade balance showed a surplus of 18.4 billion euros in May, up from 15.7 billion euros in April.
German imports dropped by 3.8% on the month, the statistics office said.
Exports to EU countries dropped by 2.2% in May on the month.
"A recovery in this economic region is the basic prerequisite for our exporters to regain their footing," de la Rubia said.
Exports of goods to countries outside the EU declined by 0.3% on the month.
($1 = 0.8519 euros)
(Reuters)
