Small- and Medium-Sized Enterprises (SMEs) in Germany express worries over potential indirect consequences of US tariffs

US Tariffs: A Looming Shadow Over German SMEs and Their Indirect Repercussions

German Small and Medium Enterprises (SMEs) express principal worry over indirect effects of US duties - Small- and Medium-Sized Enterprises (SMEs) in Germany express worries over potential indirect consequences of US tariffs

Small and medium-sized enterprises (SMEs) in Germany are bracing themselves for potential fallout from US tariffs, particularly in the metal, automotive, and machinery sectors. According to a study by DZ Bank, these businesses express greater concern about the indirect consequences rather than the tariffs themselves.

Indirect Consequences

The expected ripple effects of US tariffs could hit German SMEs hard. Some of the foreseen consequences stem from economic uncertainty, market volatility, and the impact on supply chains and export markets:

Economic Uncertainty and Market Volatility

Tariff unpredictability could erode business confidence, curtail investment decisions, and affect consumer confidence, ultimately leading to weakened economic activity and increased market volatility.

Impact on Supply Chains and Export Markets

The automotive sector is expected to be significantly affected by US tariffs, especially a proposed 25% tariff on cars. This could lead to higher prices in the US, reduced demand, and a domino effect on the entire supply chain, impacting both European and global operations.

The metal and machinery sectors could also be negatively affected, even without specific tariffs that match those of the automotive industry. The overall economic downturn and increased costs could still squeeze profit margins by reducing demand.

Increased Costs and Reduced Competitiveness

Tariffs may lead to higher costs for raw materials and components imported from the US, potentially reducing the competitiveness of German SMEs in global markets. This decrease in competitiveness might further lead to a loss of market share, as Asian competitors rise in prominence.

Financial and Credit Challenges

The uncertainty and heightened economic risk could lead to stricter credit conditions, making it harder for SMEs to access affordable financing. Additionally, investment decisions might be delayed, further impacting SMEs' ability to adapt and grow.

Potential EU-US Trade War

The ongoing trade tensions could escalate into a full-fledged trade war between the EU and the US, resulting in disrupted supply chains and increased costs all around.

In summary, the indirect consequences of US tariffs on German SMEs in these sectors could be considerable, potentially affecting their long-term profitability, investment in growth initiatives, and overall competitiveness in global markets.

1. The potential negative impact of US tariffs on German SMEs extends beyond the direct tariffs, with economic uncertainty and market volatility being significant concerns.
2. The automotive sector, facing a proposed 25% tariff on cars, risks higher prices in the US, reduced demand, and a domino effect on the entire supply chain, affecting both European and global operations.
3. The metal and machinery sectors could also be negatively affected, as increased costs and reduced demand due to US tariffs might squeeze profit margins and potentially lead to a loss of market share.
4. Tariffs could result in increased costs for raw materials and components imported from the US, reducing the competitiveness of German SMEs in global markets, with Asian competitors becoming more prominent.
5. The ongoing tariff tensions between the EU and US could escalate into a trade war, leading to disrupted supply chains, increased costs, and stricter credit conditions for SMEs due to heightened economic risk.

Read also: