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Small and Medium Enterprises (SMEs) in Germany apprehensive over potential secondary impacts of US tariffs

Customs authorities in the U.S. express worry over small and medium-sized enterprises in Germany, primarily due to indirect ramifications.

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Temporary Storage of Cargo Container in Frankfurt am Main
Temporary Storage of Cargo Container in Frankfurt am Main

US Tariffs: German Small and Medium Enterprises (SMEs) Worry Over Indirect Impacts

Impact of U.S. Tariffs: Smaller German Businesses Anxiously Consider Secondary Consequences - Small and Medium Enterprises (SMEs) in Germany apprehensive over potential secondary impacts of US tariffs

Small and medium enterprises (SMEs) in Germany, especially those in the metal, automotive, and machinery sectors, are fretting about the subtle ramifications of US tariffs, according to DZ Bank. Two-thirds of these companies anticipate indirect negative effects, with possible price increases of their own products in the US or a decrease in demand for exports to the US market.

Contrasting findings suggest that nearly one-third of companies (29%) aren't worried about US tariffs. However, they're not in the clear yet. Potential retaliatory tariffs from the European Union could hit German companies harder than the actual import duties in the US. Around 29% expect direct consequences, like higher purchase prices, while only 19% anticipate no negative effects.

DZ Bank analyst Claus Niegsch, however, isn't too alarmed about the impending cost surges. He posits that while US goods might become more expensive, goods from other countries originally intended for the American market could instead find their way to Europe, potentially lowering prices here.

The study, conducted between March 6 and March 26, polled 1,000 owners and managers of German SMEs. The exact level of tariffs on EU goods was yet to be determined, but a 25% tariff on the automotive sector was already under discussion. Tariffs of 25% on steel and aluminum had already been in effect since March 12. The survey is said to be representative of the German SME landscape.

Enriching Insights

  1. Supply Chain Disruptions: businesses might experience disruptions in the availability and cost of raw materials and components as a result of tariffs, potentially leading to increased costs and delayed production.
  2. Reduced Demand: higher costs for consumers due to tariffs could lessen their appetite for German exports, impacting sales and revenue for SMEs.
  3. Increased Competition: domestic production in the US could escalate competition for German exports, necessitating SMEs to adapt by focusing on niche markets or improving efficiency.
  4. Currency Fluctuations: tariff disputes could potentially cause currency fluctuations, affecting the profitability of exports. A weaker Euro could make German exports cheaper, but a stronger Euro could reduce competitiveness.
  5. Regulatory Challenges: compliance with new tariff regulations could burden SMEs with increased administrative costs.
  6. The employment policies of EC countries might need to address the potential job losses or restructuring within the German SME sector due to the indirect impacts of US tariffs on industries like metal, automotive, and machinery.
  7. In light of the increased competition from domestic US production and the possibility of retaliatory tariffs from the European Union, the employment policies of EC countries should consider strategies to help German SMEs remain competitive, such as fostering innovation, improving efficiency, and supporting niche market development.

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