German exports hit a record level in June, according to figures released last week. However, economists say soaring prices and rampant inflation are responsible for the increase, rather than German exports being in good health.
Germany is an export behemoth. It is the third-biggest exporter in the world, behind China in first and narrowly behind the United States in second place.
However, there is growing anxiety about the extent to which Germany’s export-dependent economy has been left exposed by a string of global events in the past few years.
Trade wars and increasing tension between the West and China, the supply shocks of the COVID pandemic and most recently, the war in Ukraine, have all upended the order upon which much of Germany’s recent prosperity has been based.
Germany’s trade data for May revealed the country’s first trade deficit in more than 30 years, meaning it had imported more than it had exported. Carsten Brzeski, economist at ING bank and a longtime German economy analyst, assessed the news in stark terms.
According to economists, the war in Ukraine puts an end to the German economic business model as we knew it — a model which was mainly based on cheap energy imports and industrial exports into an increasingly globalized world.
While much of the focus on the impact of the energy crisis has been on domestic households, German industry could potentially be hugely affected.
A survey of 3,500 companies recently carried out by Germany’s Chambers of Industry and Commerce (DIHK) found that 16% were either scaling back production or partially discontinuing business operations due to rising energy prices.
“These are alarming figures,” said DIHK President Peter Adrian.
“They show how permanently high energy prices are a burden,” he added.
