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Lowest Ranking Nation in the Union (EU) - Germany's Position

Small and Medium Enterprises (SMEs) in Germany disapprove of their business locations

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Small and Medium Enterprises (SMEs) anticipate incentives for Germany's regional development from...
Small and Medium Enterprises (SMEs) anticipate incentives for Germany's regional development from the incoming government.

SMBs Cry Foul: Tangled web of bureaucracy and trade disputes paint gloomy picture for Germany

Medium-sized and smaller businesses rate Germany negatively, according to recent assessments. - Lowest Ranking Nation in the Union (EU) - Germany's Position

Small and medium-sized businesses (SMBs) across multiple sectors are voicing their concerns, highlighting a web of red tape and global trade disputes as the primary hindrances to their growth. A survey by Forsa for Commerzbank ranks Germany a disappointing 9th in a list of economic nations, placing us behind some unexpected competitors like Italy and Vietnam.

Only 10% of the 1,525 businesses polled between mid-November and mid-February rated Germany's business environment as "excellent" or "good". A whopping 60% considered the conditions "average" or "acceptable," while nearly a third (29%) slammed them as "insufficient" or "poor".

A majority of 71% of the surveyed companies across all sectors believe the "Made in Germany" brand has lost considerable weight and are counting on a new federal government to provide much-needed impetus.

Trade Wars adding uncertainty

The ongoing trade dispute with the USA adds a layer of uncertainty to the already challenging business climate. Reports indicate that many companies are actively seeking greener pastures for their products and preparing to hike prices to counter higher tariffs.

Survey data from DZ Bank suggests that companies in the metal, automotive, and machinery sectors stand to take the most punishing blows from US tariffs and counter-tariffs. Overall, 15% of the 1,007 SMBs surveyed feel the sting of direct US tariff impacts, while 50% brace themselves for secondary effects, such as increased costs from suppliers.

Fear of EU counter-tariffs

The specter of counter-tariffs from the EU looms large and could hit SMBs even harder. Should these be imposed, nearly a third (29%) of companies anticipate higher purchase prices, and 46% fear potential impacts on their supply chains.

The data for the DZ Bank survey was collected in March - before US President Donald Trump rolled out his XXL tariff package. However, it was common knowledge that the USA was going to slap 25% tariffs, for instance, on car and steel imports. In early April, Trump threatened the EU with additional tariffs of around 20% on imports, which are currently on hold. The EU, in turn, has temporarily shelved its planned counter-tariffs and is hopeful for a negotiated settlement instead.

The Unsettling SMBs Spectrum

  • Metal Sector: German metal producers face a direct hit due to tariffs on exports, such as the 25% tariff on EU aluminum and steel. This can lead to higher production costs and diminished global competitiveness.
  • Automotive Sector: The automotive industry feels the burning heat of tariffs on car exports, with a 25% tariff on EU cars entering the US being a significant blow. This can lead to reduced demand for German vehicles in the US, placing a strain on the entire supply chain, from manufacturers to suppliers.
  • Machinery Sector: Tariffs on machinery exports can result in reduced demand and increased costs for exporters. SMBs in this sector might find it challenging to navigate these complex trade realities, potentially leading to reduced sales and revenue.

To weather these challenges, SMBs in Germany might contemplate strategies like expanding their export markets, investing in innovation to boost competitiveness, and advocating for policy changes at the EU level to secure better trade terms with the US. Additionally, bolstering supply chain resilience through local sourcing or diversification can help reduce reliance on troubled trade routes.

  1. The survey by Forsa for Commerzbank ranked Germany behind several economic nations, including Italy and Vietnam, with only 10% of the 1,525 businesses polled rating Germany's business environment as "excellent" or "good."
  2. A majority of 71% of the surveyed companies across all sectors believe the "Made in Germany" brand has lost considerable weight and are hoping for a new federal government to provide much-needed impetus.
  3. The ongoing trade dispute with the USA adds a layer of uncertainty to the already challenging business climate, with many companies actively seeking greener pastures for their products and preparing to hike prices to counter higher tariffs.
  4. The specter of counter-tariffs from the EU looms large and could hit SMBs even harder, with nearly a third (29%) of companies anticipating higher purchase prices, and 46% fearing potential impacts on their supply chains.

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