German firms would face billions in extra tariffs in hard Brexit: IW

A hard Brexit would result in extra tariffs of more than 3 billion euros ($3.44 billion) for German companies per year, a German institute said on Tuesday, adding that German exports to Britain could drop by up to 57 percent.

Talks on ending four decades of Britain’s membership in the European Union have entered their final stage, more than two years after Britons voted narrowly for Brexit in a referendum. Britain and the EU are eyeing significant progress in negotiations at an Oct. 17-18 summit.

The IW economic institute in Cologne said a hard Brexit would hit the auto sector - which employs some 800,000 people in Germany and is the country’s biggest exporter - particularly hard as it would be hit with around 60 percent of those extra costs.

IW said around 5 percent of Germany’s gross domestic product depended either directly or indirectly on trade with Britain, making it the third most important trading partner for German firms.

But IW added: “That could dramatically change in the foreseeable future.”

Referring to a potential plunge in German exports to Britain if a hard Brexit happens, IW researcher Markos Jung said: “This horrific scenario should force politicians to act constructively.”

In the long term, a hard Brexit would probably result in price rises and a shift in Germany’s flows of goods, the IW said.