German automakers lay off workers in Germany after investing in the US, ending the ‘Cold War support export economy’
The German auto industry, which has expanded its massive investment in the US, is beginning mass layoffs at its plants in Germany, marking the end of the high-growth system of the ‘Cold War support export economy’.
Bosch, Germany’s largest auto supplier, announced on the 22nd that it plans to cut 5,500 jobs starting in 2027, with more than two-thirds of the cuts expected to take place at German plants.
ThyssenKrupp, Germany’s largest steelmaker, has written off 1 billion euros ($1.04 billion) in its steel division after posting a net loss of 1.4 billion euros ($1.2 billion) for the year.
ThyssenKrupp was one of the companies hit hard by tariffs on steel and aluminum imposed by President-elect Trump during his first term. ThyssenKrupp said on the day that the layoffs would “cut the amount of steel it produces each year from the current level of 12.6 million tons to less than 10 million tons, eliminating 5,000 jobs,” and that “another 6,000 jobs will be eliminated by selling business activities or reducing the workforce through external suppliers.”
The New York Times reported on the 22nd that “ThyssenKrupp has struggled for years to decarbonize its steel production as the cost of powering its existing coke plants has soared, but in an increasingly digital world, Germany lacks new startups that can drive the next generation of growth.” “Government financing is available to help entrepreneurs start businesses, but when it comes time to expand, many move to the United States, where venture capital is more widely available and taxes are lower.”
Germany recorded 0.1% growth through September in the third quarter, ending its high growth period, but the economy is expected to contract this year.
The Huffington Post's "The Looming Threat of Trump Tariffs" analyzed on the 23rd that "China's increased tariffs will hit the German economy harder."
Germany, the world's third-largest exporter, sells cars, chemicals, and machinery to the world, but in recent years, due to geopolitics and supply chain changes, global trade has been in turmoil, and all three sectors have been in trouble, and Trump's "US tariffs" are making things difficult.
Last year, under Biden's pressure on China, the US replaced China as Germany's most important trading partner, achieving exports worth 157.9 billion euros (164.3 dollars) from the US.
Now, as President-elect Trump has promised a comprehensive tariff policy in economic policy, such as imposing tariffs of more than 60% on Chinese products, this figure may decrease, but experts diagnosed that "this could hit Germany harder."
Many German companies, including BMW, Mercedes-Benz, and Volkswagen, are already heavily invested in the United States, and dozens of auto suppliers and major chemical and pharmaceutical companies have also expanded their U.S. investments, which could hit German companies hard if Trump’s plan triggers a broader trade war, as they export more from their U.S. plants. Last year, German companies invested €15.7 billion ($16.3 billion) in the United States. The biggest draw for German investment in the United States is lower energy prices and lower taxes, and the Biden administration has focused its efforts on attracting large German and Korean companies to invest in the United States by taking advantage of incentives provided by the Inflation Reduction Act, which Trump has pledged to repeal, while Korean conglomerates have been able to “record” battery subsidies as “earned profits” on their balance sheets, sending their stock prices soaring.
President Trump said during his first term that there was a “massive trade deficit” during a visit to the Greer City Hall in Germany, where BMW’s plant is located, on May 30, 2017. The Times reported at the time, “During his recent trip to Europe, President Trump declared that Germany was “bad, very bad” on trade. The city hall in Greer, southern Germany, is just a few miles from a BMW car plant that employs about 8,800 people.
“There was a sense of urgency to make it clear that BMW and this kind of rhetoric should not be taken lightly,” said Danner, who was first elected as an independent mayor of Greer in 1999. “For us, this is not a political issue. This is a livelihood issue, a local economy issue, and a lot of other things that are going on here.”
Trump’s comments rattled southern Germany, where he tweeted earlier that day about “a huge trade deficit with Germany,” amid a trade war with Chancellor Angela Merkel.
The southern German region has long been a model for the “American support economy,” with German automakers serving as the gold standard for export-oriented economies and economic revitalization. Since Trump’s first term, Germany’s trade surplus with the US has not decreased significantly over the past four years and will reach 63.3 billion euros in 2023, allowing President Trump to raise this issue again. Korea is the most similar model.
The New York Times reported that “regardless of how President Trump’s economic policy unfolds, economists do not expect it to benefit Germany,” and “they do not expect a return to positive growth in 2025 unless the new government makes significant changes quickly after the collapse of the coalition government.”
Germany, a symbol of an export-led high-growth economy in the Cold War system between the US and the Soviet Union, has lost the low energy price system and stable exchange rate system under the US security umbrella, and as a result, the expansion of investment in the US, which came to light amidst geopolitical situations such as high energy prices, an old and complex bureaucracy, an aging public infrastructure, changes in the security landscape due to Russia’s offensive, and pressure from the US to increase its defense budget, has inevitably changed its export industry structure as it has been caught in the ‘tariff security’ of the Trump regime.
In his assessment of the German economy by the New York Times Berlin correspondent, he said, “The political paralysis of the previous government has made things worse,” and “As Germans prepare for a general election after the collapse of a fragile government coalition, one of the top issues on voters’ minds is how the new government will revive the once-strong German economy at a time of high energy prices and job cuts.”
Germany, which became Europe’s largest economy with low energy prices and low defense spending as a form of security support, has not shown significant growth in the past two years since the start of the war in Ukraine, and when natural gas supplies from Russia were cut off due to Russia’s invasion of Ukraine in 2022, Chancellor Scholz’s government quickly turned to importing liquefied natural gas to control supply prices and support households, but prices have surged 40% year-on-year.
German industrial production has fallen by more than 12% since 2018, due to higher energy prices and growing geopolitical instability.
The German government abruptly ended subsidies for electric cars late last year to cut its budget, and automakers that were ramping up production of battery-powered electric cars have seen demand plummet as customers turn away from them, resulting in massive job losses in the auto industry this year.
Ford Motor Co., the largest U.S. automaker, announced on the 20th that it would eliminate 4,000 jobs in Europe, most of them in Germany.
Volkswagen is threatening unions by closing up to three of its 10 German plants as it attempts to restructure its operations to recover from lower profitability.
The coalition government is locked in a fierce internal dispute over its “plan to close nuclear reactors” due to higher import prices from its nuclear phase-out policy.
“Whether it’s the prospect of Trump’s tariffs or the indirect weakening of German competitiveness by Germany’s tax cuts and deregulation, it’s hard to see how negative U.S. economic policies are for the German economy,” ING economist Carsten Brzeski told the Times.
President-elect Trump announced on his social media account, Truth Social, on the 25th, “On January 20th, the day of my inauguration, I will impose an additional 10% tariff on China, and a 25% tariff on Mexico and Canada.”
President-elect Trump had promised to “impose a 100-200% tariff on Chinese automobiles produced in Mexico.”
Samsung Electronics and LG Electronics are operating TV and refrigerator production plants in Mexico for sale in the United States, and Kia Motors and Hyundai Motors are exporting about 150,000 of their annual 250,000 units produced in Mexico to the United States, and major parts manufacturers are operating plants in Mexico.
LG Energy Solution and SK On, which have been using fraudulent accounting to record foreign currency debt and US aid as “earned profits,” have plants in Canada, and POSCO FutureM and EcoPro BM, which produce cathode materials, a key raw material for batteries, have also built or are building plants in Canada.
On October 15, US Republican presidential candidate Trump said, “They (South Korea) are a money machine,” and “If I were there (in the White House), they (South Korea) would spend $10 billion a year (for stationing US troops in South Korea),” and announced a tenfold increase in the existing defense burden-sharing.
In September 1983, when the pressure on the Soviet Union for nuclear war was at its peak, Republican Secretary of State Shultz, who led the extreme Cold War system of Reaganomics in the 1980s, declared at the UN General Assembly that “South Korea is a shining model of economic growth” and a testing ground for the US Cold War security umbrella. Following Germany, which grew rapidly as a dollar-dominated economy by excluding European security spending, South Korea, unlike Germany, changed from a ‘security-dominated US’ to a ‘economic cooperation’ system separated from Germany, and in a ‘South Korea-Japan joint system of capital movement that transcends borders’, ‘chaebols’ in Korea grew rapidly as a mediator of South Korea-Japan joint high growth.