The German Export Industry: A Decade of Horror

The German export industry has entered a decade of horror. And the less the government gets with the times, the worse it becomes for the industry.

Here are the five challenges facing a country that owes a large part of its prosperity to a finely tuned export machine:

#1 Self-restraint due to high energy prices

Germany's export industry faces a significant decline in its energy foundation. Industrial electricity prices per kilowatt-hour have doubled since the start of the century.

The simultaneous pursuit of multiple political objectives—punishing Russia for aggression, swiftly achieving climate neutrality and banning nuclear energy—has driven prices up. Consequently, the government has responded by lowering electricity taxes.

Domestically, imposing higher electricity prices on citizens is feasible, but this approach doesn't translate well to foreign trade. Customers abroad are reluctant to accept politically driven price hikes, especially when they don't share Germany's three key political goals.

Germany's trade surplus has been shrinking for years. Dirk Jandura, president of the Federal Association of Wholesale and Foreign Trade, is furious:

#2 China launches export offensive 2.0

The Chinese Communist Party's strategic plan aims for them to attain significant trade surpluses. In the initial phase of this export offensive, China inundated the West with predominantly low-quality yet inexpensive offers.

China dominates one-third of global manufacturing, with sales in children's toys, Christmas decorations, wooden furniture, textiles and basic technical devices – due to their cheap and abundant supply.

As reported by The Economist, President Xi Jinping aims to revolutionize China's high-tech sector, using state subsidies and political support to bolster manufacturing.

The goal: Dominate the electric car industry. With technological advancements and competitive costs, China is set to double its market share and contribute a third of global electric car production by 2030.

#3 America seeks salvation in protectionism

The USA won't serve as a replacement China for the German export industry. Both Democrats and Republicans view the substantial trade deficits as problematic.

The "10 percent idea" emerged from Donald Trump's administration, which previously imposed tariffs on steel and aluminum. Now, there's talk of implementing a ten percent import tax on all foreign goods, which could significantly harm Germany's competitive edge.

Despite America being the top destination for German exports, totaling €158 billion in 2023—surpassing both France and China—Trump refuses to accept the trade surplus. According to The Economist:

#4 Europe's leaders are not leading

The hour of the nation-state: If Britain was the only country that distanced itself from Europe, things would look different for Germany. Yet, most European governments cling to inward-looking economic, financial and social policies.

The unity of the Corona era hasn't endured. Energy policy is fragmented, with each nation pursuing its own agenda. Despite numerous papers on migration, the EU's external borders remain largely unaffected.

For example: European economic policy, necessary for a unified capital market to drive investment in the eurozone, falters due to fragmentation.

Each nation prioritizes preserving the rules and jobs of its national banking supervisors, as well as safeguarding its national banks as reserves for political crises.

No one wants to agree to a deposit insurance fund where Germans would be liable for Italian savers (or vice versa).

#5 The government has the wrong priorities

Berlin's current coalition offers little support for German exporters. With impending electoral losses in three German states and the European elections in June, foreign trade policy isn't a priority.

Prioritizing the welfare state, the Social Democratic Party (SPD) considers expanding their central goals. Basic income, essential child benefits and pension insurance subsidies are deemed untouchable. Scholz enlisted Jörg Kukies, former head of Goldman Sachs in Germany, not to overhaul the expansive welfare state policy, but to garner support for it from the business community.

Reducing CO₂ is a national goal. The Greens are trying to push through their climate agenda despite changing economic conditions. The suffering of the export industry is accepted as a side effect of a transformation process that measures its success in terms of reduction targets—less energy consumption and lower CO₂ emissions—and not in terms of increased consumption, exports and thus gross domestic product.

Liberal and thrifty: Given the proportions—the Social Democrats and Greens have 325 seats in the Bundestag, the Free Democratic Party (FDP) has 91—Germany's fiscal policy prioritizes curbing state debt. However, in realpolitik terms, it isn't conducive to the economy, particularly in a world where America and China leverage credit-financed programs. If German exporters had to choose between stimulus and debt breaks, they'd likely opt for the former.

Conclusion: The export industry lacks the divine intervention needed for a swift recovery. Despite this setback, fear is unwarranted. Confucius is quoted as the God of the export industry (and of consolation):

• The latest Pioneer Podcast guest is the former German ambassador to Argentina, Ulrich Sante.

• BYD and Tesla revealed their delivery figures for the first quarter of 2024 yesterday.

• Primate researcher Dame Jane Goodall turns 90 today.

Confession from Israel

Israeli Prime Minister Benjamin Netanyahu has taken responsibility for the attack on World Central Kitchen (WCK) staff that left seven volunteers dead. He described the incident as an "unintentional attack" by the military but remained unfazed by the consequences:

Retaliation from Iran

Iran's Supreme Leader Ayatollah Ali Khamenei has threatened retaliation following the attack on the Iranian embassy in Syria:

Religious leader Khamenei is the most influential figure in the Islamic Republic of Iran. He has the final say on all strategic matters and is also the commander-in-chief of the armed forces.

Shattered healthcare system

The World Health Organization (WHO) has strongly condemned the Israeli attack on the Al-Shifa Hospital in Gaza City. The attack, which has now ended, destroyed the largest medical facility in the Gaza Strip and severely damaged the local health system, the WHO stated in Geneva on Tuesday.

The new president of Argentina: He goes by the nickname "El Loco" (translated as "The Madman"). Javier Milei himself identifies as a follower of anarcho-capitalism - the belief that the state is an obstacle to developing a "free" society. A combination of the two resonates with his supporters, as seen in images of Milei celebrating his election victory wearing a leather jacket, disheveled hair and revving a chainsaw.

In the interview: What do you need to know about the Argentine president? In the Pioneer Podcast, we talk to the former German ambassador to Argentina, Ulrich Sante. Today, Sante works at the Landesbank Baden-Württemberg in a newly created position as Vice Chairman. This morning, he explains why Milei can have a positive impact on the precarious economic situation of Argentina — given that the country’s inflation stood at 276 percent in February:

In addition, Milei has laid an essential foundation for the future with the formation of his cabinet:

Savior? Argentina could make a positive turnaround with its new president. This is not the only reason why the former ambassador concludes with a warning to Germany and the EU:

The Pioneer Podcast features the entire conversation in German with the former Argentine ambassador. You can check it out on our website or app.

Preliminary inflation figures from the Federal Statistical Office give cause for hope. At 2.2 percent, inflation in Germany is at the level of April 2021. The vital core inflation rate, which excludes food and energy, also fell from 3.4 percent in February to 3.3 percent.

According to the Wiesbaden statisticians, falling energy costs are a critical factor in the ongoing decline in inflation. Energy prices were 2.7 percent lower than a year earlier. In addition, food prices were -0.7 percent lower than in the previous year for the first time since February 2015 (-0.2 percent).

Given this data, Germany likely wouldn't object to the European Central Bank's imminent rate cut. This is currently being hotly debated within the Governing Council, and the demand for a rate cut is growing.

Yesterday, both BYD from China and Tesla from the US announced their delivery figures for the first quarter of 2024. Tesla took the lead with 386,810 vehicles delivered from January to March. BYD, on the other hand, delivered only 300,114 vehicles, a 42 percent decrease from the previous quarter.

Problems at BYD: Demand for electric cars in the People's Republic - where BYD sells 90 percent of its products - has plummeted. Since the beginning of the year, BYD has slashed prices on nearly every model in its lineup, following competitors such as Geely and SAIC-GM-Wuling. Given the price cuts, customers are still waiting for the right time to buy.

One small victory for Tesla: In the fourth quarter of 2023, BYD had overtaken its American rival as the largest electric car manufacturer. A title that Tesla has now regained. However, compared to the previous quarter (484,507 vehicles), Tesla delivered about 20 percent fewer vehicles and fell well short of analysts' estimates.

Compared to the first quarter of 2023 (422,875 vehicles), deliveries were down 8.5 percent. This is the first year-over-year decline in deliveries since 2020.

China is also weighing on Tesla: China is the company's largest market outside the US, with more than 22 percent of its revenue coming from the People's Republic. Competitors, especially BYD, offer cheaper and more advanced vehicles there. As a result, BYD could overtake Tesla again in the coming months.

Stocks under pressure: Tesla was immediately punished on the stock market for its weak performance, falling by 4.9 percent. BYD, however, managed to gain slightly amid the negative news surrounding its American competitors, rising by 2.06 percent.

In 1960, Jane Goodall settled in the Gombe Stream National Park in Tanzania. She came to live with and learn from the wild chimpanzees during her time there.

She would go on to stay there for 25 years, demonstrating that not only humans are capable of using tools. She redefined our understanding of the relationship between humans and animals. Today Jane Goodall is 90 years old.

Born in London on April 3rd, 1934, Jane Goodall is now one of the world's leading primatologists. Her fascination with the animal world motivated her to move from science to activism. In 1977, she founded the Jane Goodall Institute in the US, which is dedicated to the conservation of nature and species.

In the summer of 2019, my colleague Chelsea Spieker met Jane Goodall in Munich. In their conversation, one of Chelsea's first interviews in the early days of our Pioneer Project, they discussed the researcher's insights and her impressive life journey.

Where does she find her energy at such an advanced age? Why did she become an activist? What can and must humans do to better protect our closest relatives?

If there is a global voice you should be listening to, it's Jane Goodall's. This woman inspires us to rethink – not only about primates but also about ourselves. Happy birthday, Jane!

Wishing you a wonderful start to your day. Stay informed. Stay with me.

Best wishes,