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Small and Medium-sized Enterprises (SMEs) in Germany express anxiety over potential indirect consequences due to US tariffs

Small to Medium Enterprises (SMEs) in Germany primarily express worry over the indirect repercussions of the US tariffs

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Transit Storage Container Held in Frankfurt am Main
Transit Storage Container Held in Frankfurt am Main

US Tariffs: Indirect Consequences Ferociously Big Concern for German SMEs in Metal, Auto, and Machinery Industries

German Small to Medium-Sized Businesses Anxious Over Indirect Tax Impact in U.S. - Small and Medium-sized Enterprises (SMEs) in Germany express anxiety over potential indirect consequences due to US tariffs

Small and Medium-sized Enterprises (SMEs) in Germany are chiefly worried about the indirect repercussions of US tariffs, as per a study by DZ Bank. These worrying implications might surge the prices of their own goods in the US market or cause a decline in demand for exports. Companies in metal, automotive, and machinery sectors are most concerned that the trade tussles with the US will impact their trading partners' businesses, in turn, negatively affecting their own operations. Around two-thirds of businesses in these sectors anticipate negative indirect effects.

While 29% of companies aren't overly concerned about the US tariffs, potential EU counter-tariffs could potentially hit German companies harder than actual US import duties. 29% expect direct consequences, such as increased purchase prices, while only 19% expect no negative impact.

However, Claus Niegsch, DZ analyst, posits that the apprehension about increased costs may be premature. As US goods might become more costly, goods from other countries originally headed for the American market might end up in Europe, potentially lowering prices in Europe due to Trump's tariffs.

The survey interviewed 1,000 owners and managers of German SMEs between March 6 and March 26. At that time, the EU tariff levels were unknown, but a 25% tariff for the automotive sector was being discussed, along with existing 25% tariffs on steel and aluminum since March 12. The survey reportedly represents the voices of German SMEs.

  • Germany
  • DZ Bank AG
  • USA
  • SMEs
  • EU
  • Frankfurt am Main
  • Metal
  • Machinery

Full-on Negative Indirect Effects

DZ Bank's analysis hints at significant indirect consequences for German SMEs in the metal, automotive, and machinery sectors. While focus on tariffs often revolves around cost increases and price competitiveness, DZ Bank spotlights various key indirect effects these tariffs might inflict on these industries:

  • Supply Chain Nightmares: Many German SMEs rely on integrated supply chains with the US market and its suppliers. Tariffs might cause delays, hike costs, and reduce the efficiency of these supply chains, consequently affecting SMEs’ operations even if they don’t export directly to the US.
  • Tight Competition: Higher tariffs on US-bound exports could potentially lead to reduced orders and revenues for SMEs in these sectors, compelling them to compete more fiercely on price and innovation in other markets.
  • Corresponding Economic Slowdown: As tariffs foster trade tensions and potentially decelerate the US economy, reduced demand from this significant trading partner could cast a gloomy shadow over German SMEs, particularly those heavily relying on automotive and machinery exports.
  • Financial Struggles: Indirect effects may exacerbate financial stress, such as higher loan impairment risks and cost inflation, impacting profitability and credit conditions for SMEs. Reports suggest that the larger economic environment combined with trade tensions could lead to a moderation in profitability for affected sectors[1].

In essence, the anticipated indirect consequences of US tariffs reported by DZ Bank for German SMEs in the metal, automotive, and machinery sectors encompass supply chain woes, competitive pressure, economic demand declines, and financial performance hurdles, which collectively could undermine the growth prospects and profitability of SMEs in these crucial industrial sectors[1].

  • The supply chain disruptions caused by US tariffs could lead to increased costs and efficiency reductions for German SMEs in the metal, automotive, and machinery sectors, even if they do not export directly to the US.
  • The potential economic slowdown in the US due to tariffs could decrease demand for German SMEs' exports, particularly those heavily relying on automotive and machinery exports, causing financial struggles and affecting profitability and credit conditions.

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