EU trade policy: More markets and closer cooperation would deliver moderate growth effects

The strongest growth impulse would result if the EU were to conclude new agreements and deepen existing ones at the same time. For Germany, this would translate into a 0.7 per cent increase in GDP in the long term. Based on 2024 GDP figures, this would correspond to approximately 29 billion euros. For the EU, the corresponding figure would be slightly above 0.6 per cent. German industries that would benefit particularly from the removal of existing trade barriers are the automotive and metal sectors, electrical equipment, and mechanical engineering.

However, the political obstacles to trade liberalisation in the scenario described are so high that it is not realistic to expect all the simulated agreements to be implemented. "Nevertheless, these calculations provide a useful benchmark for what the EU could achieve with more and deeper agreements. By concluding new free trade agreements and deepening existing ones, the EU can offer a constructive response to US tariff policy," says Thieß Petersen, economic expert at Bertelsmann Stiftung.

Combining new agreements with the deepening of existing ones would yield the largest effects, while effects are smaller when considering only parts of the scenario. A series of new trade agreements with some of the most important economies in Asia, South America and Africa, as well as with Australia, could increase German GDP by 0.36 per cent in the long term – equivalent to approximately €15.5 billion, based on 2024 GDP figures. The corresponding figure for the EU is 0.3 per cent, or just over €54 billion.

Deepening existing EU free trade agreements would have similar effects. There are currently very few trade barriers between the EU and South Korea. If the EU could bring all its existing free trade agreements up to this level, German GDP could be 0.3 per cent higher in the short term. However, such comprehensive trade agreements are also more difficult to negotiate than those focused primarily on tariff reductions.

"We should not overestimate the growth effects of individual agreements, and even if many new ones were concluded, the overall effect would be rather moderate," comments Etienne Höra, trade expert at Bertelsmann Stiftung. “In uncertain times, however, trade agreements create stability and can also help reduce dependence on individual countries. This is of great interest to both the EU and its trading partners.”