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Approximately one-third of businesses anticipate a decrease in significance of the US market, as per recent surveys

Aftermath of US Custom Duties

U.S. Market feasibility: Approximately one-third of businesses anticipate a decreasing relevance in...
U.S. Market feasibility: Approximately one-third of businesses anticipate a decreasing relevance in the U.S. market

Approximately one-third of businesses anticipate a decrease in significance of the US market, as per recent surveys

In the midst of a challenging business environment, German companies are feeling the impact of US tariffs, with over 60% reporting negative consequences due to the policies introduced by former President Donald Trump.

One of the most notable cases is Volkswagen, which reported a sharp 36.3% drop in second-quarter 2025 profits, partly attributed to US tariffs, rising production costs, and lower-margin electric vehicle sales. This significant decline reflects the adverse effects of US tariffs on market significance, trade relations, and investment activities.

The European Union (EU) is actively considering countermeasures against US tariffs, with the potential for retaliatory tariffs on US imports such as aircraft, automobiles, and industrial machinery, covering €95 billion in US products. These steps highlight the strained transatlantic trade relations due to tariff disputes.

The US tariffs and geopolitical trade uncertainty have also influenced major investment decisions. Intel’s cancellation of its planned €30 billion chip manufacturing facility in Magdeburg, Germany, is partly due to uncertain trade and economic conditions, including tariff impacts and competitive global pressures.

Approximately 30% of companies with investment plans in the US have postponed projects due to US tariffs, while around 15% have completely scrapped investment projects. The machinery and metal industries are particularly affected, with 87 and 68% of companies respectively reporting negative effects from import tariffs.

However, not all sectors are pessimistic. Around 40% of the companies surveyed expect growing sales opportunities in the EU internal market and in India. Additionally, about 25% of the companies surveyed expect the Chinese market to gain importance for their company.

Moreover, almost no companies surveyed expect less trade overall, according to the Ifo Institute. In fact, 17% of companies surveyed expect an increase in trade relations with the US. However, over 80% of companies with US locations report negative effects from the tariffs.

Interestingly, 59% of companies expect Chinese providers to increase pressure on European markets as a consequence of US tariffs. This suggests a potential shift in trade dynamics as companies seek alternative markets to offset the impact of US tariffs.

The head of the Ifo Center for International Economics, Lisandra Flach, has suggested that the EU should promptly ratify the Mercosur agreement, drive forward further trade agreements, and simultaneously reduce barriers in the internal market to mitigate the effects of US tariffs and foster a more favourable business environment.

These developments underscore the ongoing challenges faced by German businesses in their key US trade and investment interactions as of mid-2025, and the need for proactive measures to navigate the complexities of global trade policies.

[1] Volkswagen AG, Q2 2025 Earnings Report [2] European Commission, Consultation on countermeasures against US tariffs under the Trump administration's "Trump 2.0" tariff measures, May 2025

In response to the adverse effects of US tariffs on their businesses, the European Union is mulling retaliatory tariffs on US imports, including industrial machinery, which could exacerbate the strained trade relations between the EU and US. To counter these challenges, the head of the Ifo Center for International Economics has advocated for the EU to expedite the ratification of existing trade agreements, such as the Mercosur agreement, and reduce barriers within the internal market, thereby encouraging vocational training and business growth. Additionally, many companies are exploring alternative markets like the EU internal market, India, and even China, as a means of vocational training and finance to mitigate the negative consequences of US tariffs.

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