Trade Tensions: A Darkening Landscape for German Companies Abroad
Foreign Businesses Sentiment of German Firms Overseas Worsens in Trade Dispute - International trade strains: German companies' overseas outlook becomes foggy
Take a peek into the present-day struggle of German businesses overseas. In a report by the Foreign Trade Chamber (AHK), these companies are facing a deteriorating business environment and growing uncertainties in nearly every world region. This dismal outlook offers no promise of recovery in German foreign trade.
Burdened by oppressive trade policies and international reactions to them, investors see their faith wavering. Volker Treier, a key player in the discussion, explains that postponed investments or cancellations and reevaluations of traditional trade relationships are a direct consequence of these policies.
An alarming 60% of German companies entreated in this study fear the consequences of such US trade policies. In contrast, this anxiety polls at an astounding 85% among businesses in the United States. Treier warns that the unpredictable and protectionist trade policies in the USA generate considerable anxiety, causing economic activities to slow down.
Besides tariffs and counter-tariffs, German companies abroad are also wary about political manipulation of supply chains and systematic distortions of competition through subsidies and industrial policies. Treier calls for swift action from German and European Union politics, asking for improvement at home and the forging of new dependable trade relationships globally.
The survey incorporated feedback from around 4,600 German companies in approximately 90 countries. Data was collected between March 17 and April 14, 2025.
The Big Picture:
Current economic conditions of German companies foreign to their homeland, particularly in correlation with US trade policy and its impact on investment and trading relationships, are as follows:
- German Economic Landscape: Germany's economy has shown some signs of revival in May 2025, as domestic demand recovers and construction sectors revive. However, the country faces daunting challenges such as high energy costs, weakened demand from China, and intense competition from Asian goods, potentially leading to a recession in 2025 following two years of stagnation and contraction.
- The US Factor: US trade policies, particularly its tariffs, are a significant concern for German companies. About 10.4% of German exports were channeled to the US in 2024, with passenger cars, a crucial export, accounting for 13%. Ongoing tariffs, such as a 25% duty on German cars and minimum 10% penalties on other products, strain German exports and industrial output, despite some tariffs being temporarily suspended. This trade clash adds to the risk of recession in Germany and curtails growth prospects for German companies trading with or investing in the US.
- Impact on the German Economy: The current trade tensions could cost the global economic output up to 0.8% in 2025, if not for these tariffs, showcasing the tangible negative impact from US trade policies on the German economy.
- German Companies and Market Developments:
- The auto sector, including companies like Volkswagen, BMW, Porsche, and Mercedes-Benz, faces risks to US sales due to tariffs, despite modest gains from expectations of better export conditions.
- The pharmaceutical industry, with companies like Bayer, endures uncertainties in trade relationships with the US, despite strong demand for new medications.
- Despite challenges, opportunities for foreign companies—including German firms abroad—exist in the form of investing, acquiring distressed assets, and entering partnerships due to a rising number of corporate insolvencies and cautious market conditions in Germany. Innovation in AI and automation serves as a shield against risks, improving operational efficiency and regulatory compliance.
In conclusion, US trade policies, and their harmful effects on key German exports such as passenger cars and pharmaceuticals, are impeding trade relationships and investment decisions of German companies abroad adversely. The German economy bears recessionary pressures due to these barriers, and German firms are adapting through cost-cutting, innovation, and strategic acquisitions. Despite adversity, there is a cautious optimism about a modest economic rebound in 2025, offering opportunities for early entrants and innovative firms to seize evolving market conditions.
- In light of the challenging business environment highlighted by the Foreign Trade Chamber, it is crucial to consider the potential impacts of such oppressive trade policies on various aspects of a company's operations, including finance, employment policies, and business strategies within the broader context of politics and general news.
- As businesses navigate the deteriorating environment abroad, policymakers should address the concerns of German companies, particularly in relation to trade policies, supply chain manipulation, and competition distortions, to foster a conducive climate for employment policies and economic growth, thereby contributing to a stronger German and European Union business landscape.
