US tariffs: options for German manufacturing companies

Since 5 April, the USA has levied a flat basic tariff of 10 per cent on all imports - in addition to the standard tariff rate, which varies depending on the product category and was previously 0 per cent for many industrial goods. President Donald Trump had also announced that he would impose specific additional tariffs on countries with a particularly large trade deficit with the USA - including the European Union. A surcharge of 20 per cent was envisaged for the EU, and in some cases even higher for other countries. This mechanism had actually been active since 9 April, but was temporarily suspended for 90 days.

Before 5 April 2025, many goods in the commercial sector, such as machinery and equipment and electrical goods (Chapters 84 and 85 of the International Customs Tariff), were duty-free. However, with the new basic duty, all imports will now be subject to a minimum duty rate of 10 per cent, which will be added to the existing standard duty rate.

The existing special regulations remain in force, in particular the additional tariffs of 25 percent on steel, aluminium, cars and car parts. For cars from the European Union, for example, the duty rate will increase from the previous 2.5 per cent (standard duty rate) to 27.5 per cent. For pick-ups and light commercial vehicles, it will even climb from 25 to 50 per cent.

As an export-orientated economy, Germany is feeling the effects of these protectionist measures particularly keenly. Transatlantic economic relations are of key importance for German companies: the USA is Germany's most important trading partner. Bilateral trade in goods reached a volume of around 253 billion euros in 2024, with German exports accounting for around 161 billion euros - around a tenth of Germany's total export performance.

The German mechanical engineering sector is particularly affected: last year, its deliveries to the USA totalled 27.4 billion euros - more than 13 percent of total industry exports. Model calculations for the suspended 20 per cent additional duty suggest a decline in exports to the USA of around 15 per cent, which could reduce Germany's gross domestic product by an estimated 0.3 percentage points. The market irritations affect almost all export-orientated sectors, but particularly machinery and vehicle manufacturing.

However, US customs policy contains exceptions and special regulations: The aforementioned special additional tariffs apply to certain product categories such as automotive, steel and aluminium products. In addition, product groups such as copper, pharmaceutical products, semiconductors, wood products and strategic minerals are spared for the time being. The US administration has already indicated, however, that these exemptions could only be temporary.

A separate customs regime was implemented for the steel and aluminium sector in March 2025 with a uniform rate of 25% (in addition to the standard tariff rate), which also affects suppliers from the UK, Australia and neighbouring North American countries. The standard tariff rate for steel products is 0 percent, while the standard tariff rate for aluminium products is between 0 percent and 6.5 percent.

However, one notable regulation offers a potential advantage: for products with a value-added share from the USA of at least 20 per cent, the increased customs duties are only levied on the foreign value-added share.

German companies are faced with the complex task of adapting their US market strategies and at the same time securing their international competitiveness in an increasingly protectionist environment.

Another risk: a possible trade diversion. As almost all of the USA's global trading partners are facing tariffs, flows of goods originally destined for the US market - particularly from Asian countries - could be increasingly diverted to Europe and increase competitive pressure here.

The direct export volume of German steel to the USA is relatively low - it is around one million tonnes out of a domestic annual production of around 37 million tonnes, so the steel industry's concerns are more focused on the indirect consequences: Diverted Asian export volumes could destabilise the European market.

The changed framework conditions also open up strategic opportunities for German suppliers. This could create a relative competitive advantage, as competitors from China (tariff rate of more than 100 per cent), South Korea (25 per cent) or Japan (24 per cent) are faced with higher tariffs than products from Germany (20 per cent).

Despite the US dominance in certain high-tech sectors, German industry remains the leader in traditional mechanical engineering. High-quality production facilities are required for the reindustrialisation sought by the US administration - a field in which German suppliers are traditionally strong.

German manufacturing companies should pursue a multi-stage strategy: in the short term, the integration of US components is recommended in order to benefit from the 20 per cent rule, as well as the renegotiation of existing supply contracts. In the medium term, they should consider relocating certain production steps to the USA in order to avoid customs barriers. In the long term, a geographical diversification of sales markets is advisable, combined with the consistent further development of premium solutions that emphasise technological superiority and reliable quality rather than price.

Various industry-specific approaches can be identified: