Trump vs. Harris: Consequences of US Presidential Election for German Economy
Research
21.10.2024
ZEW Study Analyses Potential Economic Impact of the 2024 US Presidential Election on Germany
The outcome of the upcoming US presidential election in November 2024 could have a substantial impact on the German economy. According to a new analysis by ZEW Mannheim, financial market experts see a Harris victory as more likely to benefit economic growth in Germany. However, inflation is expected to remain largely unaffected by the outcome of the election. Based on data from the ZEW Financial Market Survey, the analysis investigates the impact both outcomes of the election could have on Germany’s economic prospects.
“Financial market experts anticipate a greater likelihood of maintaining price stability and a stabilising influence on international financial markets in the event of a Harris presidency,” says Dr. Alexander Glas, economist at ZEW’s Research Unit “Pensions and Sustainable Financial Markets”. “By contrast, Trump is perceived as pursuing a more isolationist approach and focussing on protectionism. This could hamper Germany’s economic growth potential, as Germany is among the key trading partners of the USA,” adds co-author Dr. Lora Pavlova.
Harris as a stabilising factor for the German economy
The experts surveyed consider a presidency by Kamala Harris to be more beneficial for economic growth in Germany. The majority of participants anticipate the German economy to grow moderately if Harris is elected, with a slight increase in the growth rate over the four-year term of office. In contrast, expectations under a Trump presidency are less optimistic because protectionist measures and a strong US dollar could combine to adversely affect US–German trade relations. According to the experts, transatlantic relations and cooperation within international institutions are likely to be strengthened if Harris wins the election. Trump, however, is seen as a candidate who could seek to restructure bilateral trade in particular in favour of the USA.
Negligible impact on inflation
Contrary to the economic growth forecasts, the inflation expectations for Germany hardly vary between the two analysed scenarios: The average expected inflation rate remains in both cases close to, but slightly above, the European Central Bank’s inflation target of two per cent. This suggests that while German financial market experts anticipate a weak inflationary pressure, they do not expect inflation rates to differ significantly depending on the presidency candidate.
