German economy's assessment of "Phase One Deal" ambivalent

The partial agreement reached between the USA and China in January in their trade dispute is now coming into force. The "Phase One Deal" also brings disadvantages for the German economy, as Eric Schweitzer, President of the Association of German Chambers of Industry and Commerce (DIHK), explains.

German exporters followed the coming into force of the deal "with very mixed feelings", reports Schweitzer. "On the positive side, a further global escalation in customs duties is being avoided for the time being. The negative aspect is that the majority of punitive tariffs will remain in place."

The DIHK President regrets that there is still a long way to go towards a real relaxation of the situation in world trade. A further de-escalation of the trade conflict would be of great importance for the German companies directly involved via international supply chains. After all, the USA is Germany's number one export market, China ranks third.

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The "Phase One Deal" will have an impact on aircraft production. Other parts of the deal are also causing concerns for the German economy: "China's promise to import significantly more American industrial goods threatens to have shifting effects at the expense of local industry," Schweitzer said. "In addition, it is still unclear whether the agreement is compatible with world trade rules."

In spirit, the deal contradicts the principles of free trade, because it pursues "managed trade". Schweitzer: "This model must not become a model for further trade agreements. That's why it's so crucial to restore the functioning of the World Trade Organization."

Source and photo: DIHK