Since the 1950s, Germany has been known as a nation defined by its industriousness, leading to the coinage of the nickname “world champion of exports.” But Germany’s uncompromising energy transformation to renewables, as well as the sanctions against Russia, have led to a negative trade balance in May—a first, since Germany’s reunification.
Back then, in 1991, the sudden increase in domestic consumption was responsible for a reduction of exports; today, Germany’s export deficit is caused by its enduring reliance on imported energy at ever rising prices and a reduction of exports to China and Russia.
While the total number of exports has actually only fallen by 0.5% in May, costly energy imports have caused a negative trade balance. Since last year, gas prices have gone up almost 700%; electricity by 320%. Because energy prices, particularly oil and gas, are soaring, the import value from Russia has risen by 55%, thus creating an export deficit.
On top of that, disrupted supply chains have also negatively affected the balance sheet, as the depletion of imported raw materials have also led to overall lower production and in turn less exports of final products—that otherwise would have sold at higher prices.
“The negative trade balance is not surprising, as it reflects primarily the high energy and raw material prices,” said Marcel Fratzscher, president of the German Institute for Economic Research. “It wouldn’t make sense if Germany didn’t have a negative trade balance in such a crisis, because what would be the point to always just save money as a national economy, if we don’t use our savings in harsher times.” Fratzscher continued to elaborate that the negative trade balance was a result of a so-called “terms of trade shock” that suddenly favored products that Germany cannot produce itself. “This results in a permanent loss of prosperity in Germany, at least until Germany becomes more independent from energy imports by transitioning to renewable energies.”
But not all pundits consider this to be only a temporary problem. Volker Treier, chief executive of foreign trade of the Association of German Chambers of Commerce and Industry, bleakly predicts that “the German downturn of exports has begun.” Dirk Janura, president of the Federation of German Wholesale, Foreign Trade, and Services, believes no “alternative” remains except more free trade. Holger Görg, president of the Kiel Institute of Global Economy is convinced that even once energy prices get back to normal, and the pandemic and the war end, Germany will not see a return to a clearly positive trade balance. “There is a structural effect,” predicts Görg, one that will lead to imports and exports balancing themselves out in the long run.
Analyst Heino Ruland, goes a step further to consider the negative trade balance to be a result of changing global power relations. “The German trade surplus shrinks every month as the balance of power on world markets changes,” said Ruland. With Germany lacking any alternatives to compensate for the loss of trade surplus, Germany is “already in a recession.” This prognosis is reflected in the declining role of German companies on stock markets world wide. Among the 100 largest stock corporations, only one German company is left, ranking 74th: the specialist corporation for industrial gas, Linde.
Prior to the crisis of 2008, seven German companies ranked among the top 100, even by the end of 2021 there were still three. Volkswagen, the largest representative of Germany’s former pride, the automotive industry, is ranking 155th on the global scale with a total worth of $81 billion. Compared to Elon Musk’s Tesla, which ranks 6th with a net worth of $700 billion, the economic decline of Germany becomes ever clearer.