Protectionism undermines German manufacturers' confidence

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Ilaria Valtimora
February 6, 2017
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This content is from our archive. Some formatting or links may be broken.
Protectionism undermines German manufacturers' confidence

An economic upturn is under way in the Eurozone. This should be to Germany's great relief, but, instead, German manufacturers are worried. They see a looming threat to the EU’s fragile recovery.

That threat is the protectionism emanating from America.

This is not just an issue for wind, of course. But turbine makers who export their products around the world, as well as those producing smaller parts for turbines, will be among those affected.

Evidence of this negative sentiment came out a couple of weeks ago with the release of the Ifo Business Climate Index, which gives a monthly indication of where German output will go in the near future. Historically, a worsening in the Ifo Index has been followed by a worsening in the German GDP and, as Germany is EU’s economic engine, in the Eurozone’s GDP too.

January’s Ifo Index showed that optimism among German managers regarding their business future has weakened. In particular, in the manufacturing sector the index fell by 11% from December, "due to markedly less optimistic business expectations", the Ifo Institute's president Clemens Fuest said.

And the reason many are concerned is President Trump’s evident desire to push his 'America First' agenda, starting a 'trade war'
whether by raising tariffs or introducing border taxes, or both. He believes that this is the right way to “Make America Great Again” – and those in Germany believe it will be partly at their expense.

The German economy is essentially driven by exports and the US is, since last year, the country’s major trading partner. Now that trading partner is looking inwards.

German manufacturers export 50% of what they produce abroad and this includes turbine-makers. Manufacturing accounts for 23% of German GDP, according to World Data Bank figures for 2015, and some of the biggest turbines manufacturers such as Nordex, Enercon, Siemens and Senvion are German-based. According to figures released from the US Census Bureau, Germany exported goods in the US worth over $104bn in the first 11 months of 2016.

If it becomes more expensive and logistically difficult for those firms to sell turbines in the US, then it would push up the cost of projects in a market where General Electric is the only truly indigenous global player. This should concern the US states that are keen to see further growth in wind, and developers who want to build those projects. In our view this could be a no-win situation.

It would be bad for German turbine manufacturers because it would become more expensive to export in the US. They could then be forced to grow in new markets, pursuing opportunities outside the fast-growing US market.

It could also force those firms to invest more in US factories to ensure the turbines they are make support jobs. It is easy to see ‘protectionism’ as another name for 'local content rules'.

And it would also be bad for the US, because it would lose, or at least limit, the access to expertise and technology, in which German turbine manufacturers are still holding their own in a competitive global market. Last year, German manufacturers occupied four of the top ten spots for largest turbine makers by annual installations.

The biggest potential beneficiary is GE, which is the only US firm in that list of top ten turbine makers. We could see other turbine makers grow up in the US but, in reality, they would need serious firepower to compete with their larger rivals.

Protectionist policies should not only worry German manufacturers, of course. As of 2016, the US had almost 75GW of installed wind capacity, second only by China. If it becomes harder to export turbines or even parts of them in the US, then the entire sector would be affected. We can’t be sure, but with Trump in charge we can't rule anything out.

Still, it could be worse. At least he hasn’t started a nuclear war. Yet.

An economic upturn is under way in the Eurozone. This should be to Germany's great relief, but, instead, German manufacturers are worried. They see a looming threat to the EU’s fragile recovery.

That threat is the protectionism emanating from America.

This is not just an issue for wind, of course. But turbine makers who export their products around the world, as well as those producing smaller parts for turbines, will be among those affected.

Evidence of this negative sentiment came out a couple of weeks ago with the release of the Ifo Business Climate Index, which gives a monthly indication of where German output will go in the near future. Historically, a worsening in the Ifo Index has been followed by a worsening in the German GDP and, as Germany is EU’s economic engine, in the Eurozone’s GDP too.

January’s Ifo Index showed that optimism among German managers regarding their business future has weakened. In particular, in the manufacturing sector the index fell by 11% from December, "due to markedly less optimistic business expectations", the Ifo Institute's president Clemens Fuest said.

And the reason many are concerned is President Trump’s evident desire to push his 'America First' agenda, starting a 'trade war'
whether by raising tariffs or introducing border taxes, or both. He believes that this is the right way to “Make America Great Again” – and those in Germany believe it will be partly at their expense.

The German economy is essentially driven by exports and the US is, since last year, the country’s major trading partner. Now that trading partner is looking inwards.

German manufacturers export 50% of what they produce abroad and this includes turbine-makers. Manufacturing accounts for 23% of German GDP, according to World Data Bank figures for 2015, and some of the biggest turbines manufacturers such as Nordex, Enercon, Siemens and Senvion are German-based. According to figures released from the US Census Bureau, Germany exported goods in the US worth over $104bn in the first 11 months of 2016.

If it becomes more expensive and logistically difficult for those firms to sell turbines in the US, then it would push up the cost of projects in a market where General Electric is the only truly indigenous global player. This should concern the US states that are keen to see further growth in wind, and developers who want to build those projects. In our view this could be a no-win situation.

It would be bad for German turbine manufacturers because it would become more expensive to export in the US. They could then be forced to grow in new markets, pursuing opportunities outside the fast-growing US market.

It could also force those firms to invest more in US factories to ensure the turbines they are make support jobs. It is easy to see ‘protectionism’ as another name for 'local content rules'.

And it would also be bad for the US, because it would lose, or at least limit, the access to expertise and technology, in which German turbine manufacturers are still holding their own in a competitive global market. Last year, German manufacturers occupied four of the top ten spots for largest turbine makers by annual installations.

The biggest potential beneficiary is GE, which is the only US firm in that list of top ten turbine makers. We could see other turbine makers grow up in the US but, in reality, they would need serious firepower to compete with their larger rivals.

Protectionist policies should not only worry German manufacturers, of course. As of 2016, the US had almost 75GW of installed wind capacity, second only by China. If it becomes harder to export turbines or even parts of them in the US, then the entire sector would be affected. We can’t be sure, but with Trump in charge we can't rule anything out.

Still, it could be worse. At least he hasn’t started a nuclear war. Yet.

An economic upturn is under way in the Eurozone. This should be to Germany's great relief, but, instead, German manufacturers are worried. They see a looming threat to the EU’s fragile recovery.

That threat is the protectionism emanating from America.

This is not just an issue for wind, of course. But turbine makers who export their products around the world, as well as those producing smaller parts for turbines, will be among those affected.

Evidence of this negative sentiment came out a couple of weeks ago with the release of the Ifo Business Climate Index, which gives a monthly indication of where German output will go in the near future. Historically, a worsening in the Ifo Index has been followed by a worsening in the German GDP and, as Germany is EU’s economic engine, in the Eurozone’s GDP too.

January’s Ifo Index showed that optimism among German managers regarding their business future has weakened. In particular, in the manufacturing sector the index fell by 11% from December, "due to markedly less optimistic business expectations", the Ifo Institute's president Clemens Fuest said.

And the reason many are concerned is President Trump’s evident desire to push his 'America First' agenda, starting a 'trade war'
whether by raising tariffs or introducing border taxes, or both. He believes that this is the right way to “Make America Great Again” – and those in Germany believe it will be partly at their expense.

The German economy is essentially driven by exports and the US is, since last year, the country’s major trading partner. Now that trading partner is looking inwards.

German manufacturers export 50% of what they produce abroad and this includes turbine-makers. Manufacturing accounts for 23% of German GDP, according to World Data Bank figures for 2015, and some of the biggest turbines manufacturers such as Nordex, Enercon, Siemens and Senvion are German-based. According to figures released from the US Census Bureau, Germany exported goods in the US worth over $104bn in the first 11 months of 2016.

If it becomes more expensive and logistically difficult for those firms to sell turbines in the US, then it would push up the cost of projects in a market where General Electric is the only truly indigenous global player. This should concern the US states that are keen to see further growth in wind, and developers who want to build those projects. In our view this could be a no-win situation.

It would be bad for German turbine manufacturers because it would become more expensive to export in the US. They could then be forced to grow in new markets, pursuing opportunities outside the fast-growing US market.

It could also force those firms to invest more in US factories to ensure the turbines they are make support jobs. It is easy to see ‘protectionism’ as another name for 'local content rules'.

And it would also be bad for the US, because it would lose, or at least limit, the access to expertise and technology, in which German turbine manufacturers are still holding their own in a competitive global market. Last year, German manufacturers occupied four of the top ten spots for largest turbine makers by annual installations.

The biggest potential beneficiary is GE, which is the only US firm in that list of top ten turbine makers. We could see other turbine makers grow up in the US but, in reality, they would need serious firepower to compete with their larger rivals.

Protectionist policies should not only worry German manufacturers, of course. As of 2016, the US had almost 75GW of installed wind capacity, second only by China. If it becomes harder to export turbines or even parts of them in the US, then the entire sector would be affected. We can’t be sure, but with Trump in charge we can't rule anything out.

Still, it could be worse. At least he hasn’t started a nuclear war. Yet.

An economic upturn is under way in the Eurozone. This should be to Germany's great relief, but, instead, German manufacturers are worried. They see a looming threat to the EU’s fragile recovery.

That threat is the protectionism emanating from America.

This is not just an issue for wind, of course. But turbine makers who export their products around the world, as well as those producing smaller parts for turbines, will be among those affected.

Evidence of this negative sentiment came out a couple of weeks ago with the release of the Ifo Business Climate Index, which gives a monthly indication of where German output will go in the near future. Historically, a worsening in the Ifo Index has been followed by a worsening in the German GDP and, as Germany is EU’s economic engine, in the Eurozone’s GDP too.

January’s Ifo Index showed that optimism among German managers regarding their business future has weakened. In particular, in the manufacturing sector the index fell by 11% from December, "due to markedly less optimistic business expectations", the Ifo Institute's president Clemens Fuest said.

And the reason many are concerned is President Trump’s evident desire to push his 'America First' agenda, starting a 'trade war'
whether by raising tariffs or introducing border taxes, or both. He believes that this is the right way to “Make America Great Again” – and those in Germany believe it will be partly at their expense.

The German economy is essentially driven by exports and the US is, since last year, the country’s major trading partner. Now that trading partner is looking inwards.

German manufacturers export 50% of what they produce abroad and this includes turbine-makers. Manufacturing accounts for 23% of German GDP, according to World Data Bank figures for 2015, and some of the biggest turbines manufacturers such as Nordex, Enercon, Siemens and Senvion are German-based. According to figures released from the US Census Bureau, Germany exported goods in the US worth over $104bn in the first 11 months of 2016.

If it becomes more expensive and logistically difficult for those firms to sell turbines in the US, then it would push up the cost of projects in a market where General Electric is the only truly indigenous global player. This should concern the US states that are keen to see further growth in wind, and developers who want to build those projects. In our view this could be a no-win situation.

It would be bad for German turbine manufacturers because it would become more expensive to export in the US. They could then be forced to grow in new markets, pursuing opportunities outside the fast-growing US market.

It could also force those firms to invest more in US factories to ensure the turbines they are make support jobs. It is easy to see ‘protectionism’ as another name for 'local content rules'.

And it would also be bad for the US, because it would lose, or at least limit, the access to expertise and technology, in which German turbine manufacturers are still holding their own in a competitive global market. Last year, German manufacturers occupied four of the top ten spots for largest turbine makers by annual installations.

The biggest potential beneficiary is GE, which is the only US firm in that list of top ten turbine makers. We could see other turbine makers grow up in the US but, in reality, they would need serious firepower to compete with their larger rivals.

Protectionist policies should not only worry German manufacturers, of course. As of 2016, the US had almost 75GW of installed wind capacity, second only by China. If it becomes harder to export turbines or even parts of them in the US, then the entire sector would be affected. We can’t be sure, but with Trump in charge we can't rule anything out.

Still, it could be worse. At least he hasn’t started a nuclear war. Yet.

An economic upturn is under way in the Eurozone. This should be to Germany's great relief, but, instead, German manufacturers are worried. They see a looming threat to the EU’s fragile recovery.

That threat is the protectionism emanating from America.

This is not just an issue for wind, of course. But turbine makers who export their products around the world, as well as those producing smaller parts for turbines, will be among those affected.

Evidence of this negative sentiment came out a couple of weeks ago with the release of the Ifo Business Climate Index, which gives a monthly indication of where German output will go in the near future. Historically, a worsening in the Ifo Index has been followed by a worsening in the German GDP and, as Germany is EU’s economic engine, in the Eurozone’s GDP too.

January’s Ifo Index showed that optimism among German managers regarding their business future has weakened. In particular, in the manufacturing sector the index fell by 11% from December, "due to markedly less optimistic business expectations", the Ifo Institute's president Clemens Fuest said.

And the reason many are concerned is President Trump’s evident desire to push his 'America First' agenda, starting a 'trade war'
whether by raising tariffs or introducing border taxes, or both. He believes that this is the right way to “Make America Great Again” – and those in Germany believe it will be partly at their expense.

The German economy is essentially driven by exports and the US is, since last year, the country’s major trading partner. Now that trading partner is looking inwards.

German manufacturers export 50% of what they produce abroad and this includes turbine-makers. Manufacturing accounts for 23% of German GDP, according to World Data Bank figures for 2015, and some of the biggest turbines manufacturers such as Nordex, Enercon, Siemens and Senvion are German-based. According to figures released from the US Census Bureau, Germany exported goods in the US worth over $104bn in the first 11 months of 2016.

If it becomes more expensive and logistically difficult for those firms to sell turbines in the US, then it would push up the cost of projects in a market where General Electric is the only truly indigenous global player. This should concern the US states that are keen to see further growth in wind, and developers who want to build those projects. In our view this could be a no-win situation.

It would be bad for German turbine manufacturers because it would become more expensive to export in the US. They could then be forced to grow in new markets, pursuing opportunities outside the fast-growing US market.

It could also force those firms to invest more in US factories to ensure the turbines they are make support jobs. It is easy to see ‘protectionism’ as another name for 'local content rules'.

And it would also be bad for the US, because it would lose, or at least limit, the access to expertise and technology, in which German turbine manufacturers are still holding their own in a competitive global market. Last year, German manufacturers occupied four of the top ten spots for largest turbine makers by annual installations.

The biggest potential beneficiary is GE, which is the only US firm in that list of top ten turbine makers. We could see other turbine makers grow up in the US but, in reality, they would need serious firepower to compete with their larger rivals.

Protectionist policies should not only worry German manufacturers, of course. As of 2016, the US had almost 75GW of installed wind capacity, second only by China. If it becomes harder to export turbines or even parts of them in the US, then the entire sector would be affected. We can’t be sure, but with Trump in charge we can't rule anything out.

Still, it could be worse. At least he hasn’t started a nuclear war. Yet.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.