| German election frontrunner Friedrich Merz found pithy words about the German business model this week but failed to present a realistic alternative. Germany’s business model has often been described threefold: cheap Russian energy, exports to all over the world, including China, and low military spending thanks to the security provided by the USA. But this model is “gone,” Merz said in an interview with The Economist, joining a large consensus of economists and political observers. At the same time, he also said that Germany’s export-led approach could “definitely” survive. This is, however, a bold statement. Trump’s announcement of “reciprocal” tariffs is just the latest sign of a structural shift in Washington's policy, growing increasingly hostile to imports in a bid to secure manufacturing jobs across the country. Well-paid service jobs tend to be concentrated in larger cities, contributing to the rural-urban divide. The US is Germany’s largest export market, followed by China, which is increasingly competing with Germany’s core industries – cars, machinery, and chemicals – on global markets. Meanwhile, opening up new export markets takes time, given the EU’s difficulties in striking trade deals that please exporters and farmers alike.
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