-Analysis-

BERLIN — Germany’s economy is successful because of its exports. But that success may be coming to an end as nations that buy Germany’s goods and services are facing serious political crises.

Germany will have to adapt as populists forces surge in Britain, France, the Netherlands and the U.S. Diminishing volumes of sales in the export market could severely harm the German economy, killing employment and prosperity.

This time, as they say everything is different. Strategists and analysts at German banks are not taking the risk of being regarded as optimists. They had previously played down the possibility of Britain’s exit from the European Union and shrugged off Trump as a joke. This will not happen again. Now, the strategists of the country's biggest financial institutions are examining all possible risks. No danger is too insignificant to be thoroughly analyzed.

Among the potential dark scenarios, Germany’s Commerzbank points to one particularly touchy issue. They are questioning the entire German business model, using just one chart to demonstrate the country's colossal growth of exports since the turn of the century. For some countries, they expect it to flatten or fall drastically.

The graph shows that Germany's most important buyers have been haunted by political upheaval that might get worse next year. “Six of Germany's most important buyer countries are afflicted with political insecurity. Many investors fear another push towards the anti-establishment movement,” says Commerzbank.

Germany owes growth in the last couple of years mostly to global trade. But now, with the pushback against globalization, Germany will be forced to reinvent itself.

“We are entering an era of de-globalization,” says George Saravelos, a strategist at Deutsche Bank. Countries that grow nationalistic will significantly reduce trade surpluses that countries like Germany currently enjoy.

Close up in Hamburg — Photo: Gabriele Diwald

The U.S., Germany’s most important partner, will be the biggest headache. President-elect Donald Trump has made clear that he wants to reduce America’s trade deficit. Over the last 12 months, Germany has exported goods and services of 108 billion euros to the U.S., whereas imports from there have accounted for only 59 billion euros. Thus, trade surplus with the U.S. amounts to about 50 billion euros. At the turn of the millennium, Germany’s surplus was only 12 billion euros. Under Trump, that's what Germany might be heading toward again.

Germany’s second biggest trade partner, France, is facing presidential elections next year. Conservative candidate François Fillon has already announced a radical reform program. He wants to make his country more competitive by increasing exports. Today, Germany generates a surplus of 35 billion euros trading with its neighbor, a figure that has been consistent over the last five years.

Germany’s third biggest trade partner, Britain, is about to leave the European Union following the Brexit referendum, which most certainly will cut back trade relations. For the moment, Britain’s collaboration with Germany mostly benefits the latter. The trade surplus for Germany has doubled since 2012, and amounts to 52 billion euros today.

Never a straight line

Trade with the Netherlands and China is not exactly threatened even though both partners are facing political instability. Netherlands is preparing for elections in the spring and populist Geert Wilders has a good shot at winning. China, on the other hand, must rigorously fight the decline of its currency. Their foreign currency reserves have melted by one trillion dollars since 2014.

Moves toward nationalization and sealing off trade are not unprecedented in Europe's history. Globalization has never been a linear process. For instance, World War I interrupted the first big wave of globalization. Protectionist measures by the end of 1920s shut it down altogether. “In 1928, on the eve of the Great Depression, (U.S. President) Herbert Hoover won the election with a manifesto that stipulated higher custom duties on agricultural products,” says Saravelos, drawing parallels with the situation today.

Two years after Hoover’s announcement, taxes on more than 20,000 products had been levied, surpassing anything previously seen in U.S. history. America's most important trading partners — Canada, France and Britain — reacted with counter-measures. Germany pulled out of the trade partnership altogether. The rest, as we know, is history.