U.S. Tariffs: Understanding the Global Impact and Its Repercussions on Iraq and Germany
In April 2025, President Trump announced new tariffs on imported goods. These tariffs include a 10% tax on all imports and higher rates on specific countries, including 34% on Chinese goods and 20% on all EU products. There is also a 25% tariff on cars and trucks imported from outside North America. The White House stated these tariffs will remain until trade imbalances are addressed, aiming to protect American industries.
Background and Implications
- Protection of U.S. Industry: Supporters argue that these tariffs protect American factories and farms by making foreign goods more expensive, boosting local jobs, and increasing government revenue.
- Rising Prices and Inflation: Tariffs increase the cost of imports, leading to higher consumer prices. Analysts estimate the 2025 tariffs may raise U.S. inflation by 1 percentage point and cost households between $2,000–$3,800 per year. Globally, inflationary pressure is expected to spread.
- Global Tensions: The EU and China responded with warnings of countermeasures. Global markets reacted sharply: U.S. stocks lost $2.4 trillion in one day, and the dollar weakened. A prolonged trade war could shrink global GDP by up to 0.7% and reduce trade by 3–7%.
- Mixed Economic Effects: While certain U.S. industries may benefit, experts highlight the broader risks: supply chain disruptions, rising costs, and slower global growth. The Yale School of Management estimated the tariffs could generate $3 trillion in U.S. revenue over a decade, but at a significant economic cost.
Global Trade Effects
The tariffs disrupted global trade flows. The dollar weakened, making U.S. goods cheaper abroad but increasing the cost of imports. Many countries began seeking alternative trade partners. Economists predict a trade realignment, with a boost in South–South trade, regional trade agreements, and reduced reliance on Western markets. Countries in the Gulf and Africa are strengthening ties with BRICS and exploring intra-regional trade to counteract U.S. influence.
Impact on Germany’s Economy
Germany, a major exporter to the U.S., is among the most heavily impacted. In 2024, it exported over €253 billion to the U.S., primarily in cars, machinery, and chemicals, precisely the sectors targeted by tariffs. A 20% duty on EU goods and 25% on autos could significantly reduce German exports.
German industry analysts estimate the country may lose up to €200 billion in output. The automotive lobby labelled the tariffs an “unprecedented attack on international trade,” warning of job losses and production cuts. Germany may redirect exports toward Asia and deepen intra-EU trade to mitigate the damage.
Impact on Iraq’s Economy
Iraq faces a 39% U.S. tariff, though crucially, this excludes oil. Since oil makes up nearly all of Iraq’s exports to the U.S., the impact is initially limited. In January 2025, Iraq exported over $10 billion in oil to the U.S., earning a trade surplus of around $6 billion.
However, Iraq imported around $9.5 billion in U.S. goods in 2024, including essential machinery and medical equipment. If trade slows due to political tension or inflation, Iraq may turn to other suppliers, increasing costs and delaying infrastructure projects.
The greater risk for Iraq lies in a global slowdown. Lower oil demand could push prices below $75/barrel—dangerous for an economy that depends on oil revenues for 95% of its budget. Prime Minister Al-Sudani has convened emergency trade meetings and is seeking new partnerships to diversify the economy and reduce vulnerability.
Trade Redirection, Inflation, and New Alliances
Countries affected by U.S. tariffs are redirecting exports. Japan, the EU, and others are pivoting to non-U.S. markets. South–South trade is growing. Gulf states are deepening trade with China and other Asian partners. Inflationary pressure is mounting: for example, U.S. apparel prices could rise 17%. Globally, inflation will ripple outward, affecting import-dependent countries like Iraq.
Germany and Iraq are both exploring new alliances. Germany may deepen its trade ties in Asia and Africa. Iraq is looking to Asia and neighbouring Arab countries, as well as reinforcing strategic dialogues with the U.S.
Addressing the Impact of the U.S. Tariffs
In the face of shifting trade dynamics, both Germany and Iraq must adopt proactive strategies to mitigate the risks posed by the new U.S. tariff landscape and to seize emerging opportunities.
For Germany, diversifying export destinations and reducing reliance on the U.S. market are critical. German companies are increasingly looking toward growth markets in the Middle East, particularly Iraq, where industrial development and infrastructure needs are expanding rapidly. For Iraq, reducing dependence on U.S. imports and building more resilient supply chains is key. By strengthening ties with European partners like Germany, Iraq can gain access to high-quality alternatives in machinery, energy, construction, and healthcare sectors. Joint initiatives, such as industrial training, renewable energy projects, and SME development programs supported by AHK Iraq and its partners, offer practical pathways for long-term economic resilience. These initiatives help both economies weather global shocks while creating shared value.
Sources: Reuters, Bloomberg, Yale School of Management, World Bank, IMF, United Nations UNCTAD, VDA (German Automotive Industry Association), IW Köln Institute for Economic Research, Iraq Ministry of Trade, EY Global Trade Tracker (2024–2025).