Survey: SMEs Increasingly Focus on Germany and Europe Due to Trump - Germany's Mittelstand shifts focus as U.S. trade chaos pushes firms toward Europe and India
Germany's mid-sized firms, known as the Mittelstand, are rethinking their global strategies. Rising concerns over dependence on Europe and unpredictable U.S. trade policies have pushed many to refocus on domestic and European markets. At the same time, new trade deals with India are opening fresh opportunities for growth.
By autumn 2025, nearly a quarter of mid-sized companies blamed Donald Trump's volatile policies for creating instability in their planning. While only 12 percent experienced direct effects from his tariffs, almost half felt indirect impacts through disrupted supply chains and customer networks. Even after the EU-U.S. tariff agreement in summer 2025, 44 percent still reported lingering consequences—down slightly from 50 percent earlier that year.
The metals, automotive, and mechanical engineering sectors faced the most severe disruptions, with four in ten firms affected. Electrical and chemical industries, heavily reliant on exports, also struggled under U.S. tariffs. In response, half of the surveyed companies now plan to move procurement and sales closer to home, reducing reliance on both the U.S. and Europe.
A turning point came in late January 2026, when the EU finalised a free trade agreement with India. The deal slashed or eliminated tariffs on most European exports, offering a major boost to German manufacturers. Machinery, chemicals, pharmaceuticals, and steel producers stand to benefit most, with EU exports to India potentially doubling by 2032. Firms like cable manufacturer Lapp are already expanding specialised exports to India, signalling a broader shift in trade priorities.
The Mittelstand is now balancing risk by diversifying supply chains and exploring new markets. With Europe seen as a growing liability and U.S. policies remaining unpredictable, many are prioritising domestic and Indian markets. The EU-India trade deal provides a clear path for expansion, while domestic production gains renewed importance in long-term planning.
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