(Yicai) Feb. 26 -- Mathieu Savary, the chief strategist for the European Investment Strategy of independent investment research firm BCA Research, said he believes "global machinery trade is close to a trough" and will improve, which will be very positive for Germany over the coming years.

The constraints of Germany's fiscal drag will gradually diminish in the second half of this year and the coming years, Savary said to Yicai in a recent interview. The energy balance in Europe, especially in Germany, will significantly improve next year, he added.

Excerpts from the interview are below: 

Yicai: Ifo's Institute for Economic Research in Germany released its export expectations yesterday, which stood at minus five points this month, remaining in negative territory over the past two years. When will the country's exports improve?

Mathieu Savary: Trade remains a tougher issue. In the near term, the situation doesn't look good. Global trade is not in great shape and continues to drag on the German economy.

However, over time, we believe this will improve. China, for instance, is implementing fiscal and monetary stimulus, which we expect to continue and should help revitalize the Chinese economy. This will benefit Europe.

One of our major hypotheses this year is that the global economy is increasingly in a very large capital cycle, driven by the need to realign supply chains, move away from reliance on Russian imports, and execute a green transition.

This will account for trillions in spending, around USD6 trillion to USD7 trillion annually over the next 10 to 15 years. This is very positive for Germany, as the country exports machinery, which accounts for around 45 percent to 47 percent of its exports, far more than automobiles.

Yicai: The Donald Trump administration announced tariffs on steel and aluminum, with more potentially to come. What will be the impact on Germany's economy?

MS: The 25 percent tariffs on steel and aluminum are not that big a deal for Europe because Europe doesn't export that much steel to the US. But it is symptomatic of the environment we're in. To us, it signals that the trade war is far from over.

What's more concerning is that when announcing those 25 percent tariffs, Trump also mentioned that more tariffs would be announced soon. He wasn't clear on the timing, whether it would be this week or by the end of the month. So, we're not done yet.

This is still very negative for Germany because it means that global trade uncertainty remains very high and is actually increasing right now. Historically, rising trade uncertainty hurts Germany. When trade uncertainty increases, actual trade decreases, and exports, which account for 36 percent of Germany's GDP, are negatively impacted.

Yicai: Do you have an estimate of when Germany will be able to emerge from its energy cost troubles?

MS: It will start to ease by the end of this year or early 2026. First, there needs to be a trade deal between Europe and the United States, which we expect to happen this year.

We are becoming more optimistic because Europe is building substantial infrastructure, including 350 billion cubic meters of regasification capacity for liquefied natural gas. This capacity exceeds the total amount of natural gas imports Europe received in 2019.

The trade deal is one thing, but on the other side of the equation, the Europeans are building capacity to import natural gas, but they haven't fully completed it yet. The ramp-up started in 2024 and is continuing this year. A lot of it will come online in 2026, and some will be ready by 2027.

Europe's ability to handle this is constrained right now, but this constraint will gradually ease over time. That's why we believe 2026 is really when we'll see the most meaningful improvement in Europe's energy balance, especially in Germany.

Editor: Martin Kadiev