German Exports Decline More Than Expected in May

By Maria Martinez

BERLIN (Reuters) – German exports fell more than expected in May, as the positive effects from companies rushing to beat U.S. tariffs diminished.

Exports from Europe’s biggest economy declined by 1.4% in May compared to the previous month, according to data from the federal statistics office. This was a significant change from a Reuters poll forecast predicting a 0.2% decrease.

Exports to the United States fell by 7.7% month-on-month in May, following a 10.5% decline in April. Although a baseline U.S. tariff of 10% was enacted on April 5, analysts noted it had only a modest impact.

Carsten Brzeski, global head of macro at ING, explained that trade has reverted to January levels, attributing the declines in April and May mainly to a reversal of the frontloading seen in February and March, where exports to the U.S. rose by 8.5% in February and 2.4% in March.

Brzeski stated, “The 10% tariffs should be manageable for German exports, as they often pertain to less price-sensitive sectors,” adding that the strengthening euro against the dollar heightened exporters’ concerns.

In comparison to May 2024, exports to the U.S. decreased by 13.8% on both a calendar and seasonally adjusted basis in May of this year.

Ralph Solveen, a senior economist at Commerzbank, warned that without an agreement between the EU and the U.S. preventing higher tariffs, exports to the U.S. are likely to continue declining in the upcoming months.

Brzeski also mentioned that the initial macro data for the quarter point to potential stagnation or even a minor contraction of the German economy in the second quarter.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, echoed this sentiment, stating, “The effect of the 10% tariff is probably modest, as all countries face the tariff burden on imports, limiting comparative advantages.”

Despite the current situation, the U.S. remains Germany’s largest trading partner as of 2024, with a two-way goods trade totaling €253 billion ($277.84 billion).

U.S. President Donald Trump has set a July 9 deadline for the EU and other trade partners to reach agreements that would avert significant tariffs. The EU is working toward a trade deal, and German Finance Minister Lars Klingbeil asserted the EU is prepared to implement countermeasures if they cannot secure a fair deal.

Germany’s foreign trade balance showed a surplus of €18.4 billion in May, up from €15.7 billion in April, while German imports decreased by 3.8% for the month. Additionally, exports to EU countries fell by 2.2% in May.

De la Rubia emphasized, “A recovery in this economic region is essential for our exporters to regain their footing.”

Exports of goods to countries outside the EU experienced a slight decline of 0.3% in May.

> ($1 = 0.8519 euros)