Pessimism Abounds: German Firms Abroad Face Tough Times Amid Global Economic Slump
Global businesses report worsening conditions globally among German enterprises, according to a survey by IHS Markit and BDI.
The economic landscape for German businesses operating overseas is bleak, according to the World Business Outlook (WBO) of the Foreign Trade Chambers (AHK) for Spring 2025. The survey, conducted among around 4,600 German firms spread across over 90 countries, indicates a steep decline in optimism compared to the previous fall.
"The fresh US trade policy has hit German companies abroad like a freight train," says Volker Treier, Chief of Foreign Trade at the German Chamber of Industry and Commerce (DIHK). "The testy US trade policy and global responses to it have sent a seismic wave through the world economy—investors are losing trust in reliable economic conditions." This lack of confidence has real consequences—investments are being postponed or cancelled, and traditional trade relationships are being reevaluated, warns Treier.
The survey period coincided with a series of geopolitical upheavals, including the so-called "Liberation Day" when US President Donald Trump announced tariffs against almost all of the USA's trading partners. The overall mood worldwide appears gloomy. A mere 19% of companies now anticipate an improvement in local business, down from 27% previously. Conversely, 33% foresee a slowdown, a significant increase from the previous 22%. This digest checks out the reasons behind the economic malaise, regional variations in outlook, and sector-specific trends that German businesses may find themselves grappling with.
The Mixed Bag: Economic Expectations for German Businesses Abroad
The shift in economic expectations demonstrates a substantial rise in uncertainty and risk perception among German businesses abroad. This shift can be attributed to several factors, including the combined aftereffects of the COVID-19 pandemic, the energy price crisis, and the new US trade policy, which exerts a deep, negative impact on the global economy [1][2].
A Tumultuous Trade Environment: US Trade Policy and Global Economic Conditions
The newly introduced US trade policy has increased economic hardships for German companies. Concerns about tariffs and trade barriers have arisen, which affect export volumes, especially in key sectors like automotive and industrial goods. Given that roughly 10.4% of German exports went to the US in 2024, including 13% in passenger cars, the prospect of tariffs is particularly concerning for German exporters [2][4][5]. This comes at a time when the economy is already strained by high energy costs, weakening demand from important markets like China, and increasing regulatory burdens and labor costs, which collectively undercut the companies' competitiveness abroad.
Modest Rays of Sunshine: Regional Variations in Outlook
- Vietnam and the Indo-Pacific: Despite the tough global climate, German businesses in Vietnam maintain a relatively optimistic outlook. Here, 54% of firms expect improved business conditions in the next year, with 80% rating their current situation as good or satisfactory. This positive outlook can be traced to Vietnam's growing status as a manufacturing hub and strategic alternative in the Indo-Pacific region, with continued investment and workforce expansion by German firms [3].
- Industrial Sector vs. Service Sector: The broader foreign business landscape reveals a stark contrast between the industrial sector and the service sector. The industrial sector is more pessimistic, with 42% of companies planning job cuts in 2025. The service sector appears more resilient, with fewer anticipated layoffs and a higher inclination to hire, suggesting that sectoral differences may guide how German firms are managing economic uncertainty [4].
In conclusion, the outlook for German businesses abroad in 2025 is fraught with economic pessimism primarily driven by the new US trade policy and unfavorable global economic conditions. Although companies worldwide expect deteriorating economic conditions, pockets of resilience exist, particularly in regions like Vietnam where German firms see growth opportunities. However, the overall sentiment points towards a cautious stance, with many German firms bracing for slower growth, potential job cuts, and adapting to a more challenging trade environment [1][2][3][4][5].
- In light of the pessimistic business outlook, there has been a call for community policy reforms to support German businesses in coping with the economic crisis, particularly in the context of the US trade policy and global economic conditions.
- As a response to the tough global climate, various vocational training programs have been proposed to upskill the workforce and help German companies maintain their competitiveness, especially in sectors impacted by tariffs and trade barriers.
- Concerned about the financial implications of the unfavorable global economic conditions, some German businesses have sought to diversify their investments, looking for growth opportunities in less affected regions like Vietnam, and reevaluating their strategic ventures in line with the general-news and political changes around the world.
