German Exports To Drop €31 Billion Due to U.S. Tariffs Imposition

According to Deloitte, U.S. tariffs could lead to a €31 billion annual loss in German exports in the medium term, driven by a 15% tariff on most EU goods. The German engineering sector faces the largest hit, with €7.2 billion in losses due to a 23% export drop, followed by pharmaceuticals (€5.1 billion, 20% drop) and industries like chemicals, automotive, and electrical engineering. Some losses may be offset by redirecting exports to markets like the EU, Indonesia, or South Korea.

Exports account for roughly 40% of Germany’s GDP. A €31 billion loss could reduce GDP by approximately 0.7-1%, assuming no full offset from other markets. This could exacerbate Germany’s economic stagnation, with 2025 growth forecasts already near zero.

The engineering sector (€7.2 billion loss) and pharmaceuticals (€5.1 billion) face the brunt, potentially leading to reduced production, layoffs, and lower investment. Automotive, chemical, and electrical industries would also see significant declines, eroding industrial output.

Export-dependent industries employ millions. A 15-23% export drop could threaten tens of thousands of jobs, particularly in manufacturing hubs like Bavaria and Baden-Württemberg, increasing unemployment and reducing consumer spending. Reduced exports may disrupt domestic supply chains, impacting SMEs reliant on larger exporters, further dampening economic activity.

Lower tax revenues from affected industries could strain government budgets, limiting fiscal stimulus or public investment. Redirecting exports to the EU or Asia (e.g., Indonesia, South Korea) may mitigate some losses, but this shift requires time and investment, with no guarantee of matching U.S. market demand.

Tariffs could raise input costs for German firms reliant on U.S. markets, potentially increasing prices and affecting competitiveness. While Germany’s economy is resilient, the export loss could deepen challenges in an already sluggish recovery, with ripple effects on employment, investment, and consumer confidence. Long-term adaptation to new markets may help, but short-term pain is likely.

The €31 billion drop in German exports due to U.S. tariffs, as projected by Deloitte, would significantly impact small and medium-sized enterprises (SMEs), which form the backbone of Germany’s economy, particularly in export-oriented sectors. Many SMEs are suppliers to larger exporters in engineering, automotive, chemicals, and pharmaceuticals.

A 15-23% export decline in these sectors could reduce orders, hitting SME revenues and potentially forcing production cuts or layoffs. SMEs directly exporting to the U.S. (e.g., niche machinery or components) may face sharp revenue drops due to the 15% tariff, making their products less competitive. Smaller firms lack the financial cushion to absorb such losses compared to larger corporations.

SMEs employ about 60% of Germany’s workforce. Reduced demand could lead to layoffs, particularly in manufacturing-heavy regions like Bavaria or Baden-Württemberg, exacerbating local unemployment. Tariffs may raise input costs for SMEs reliant on U.S. markets or supply chains, squeezing profit margins. Smaller firms often lack the bargaining power to negotiate better terms or absorb cost increases.

While larger firms may redirect exports to markets like the EU or Asia, SMEs often lack the resources, networks, or scale to pivot quickly to new markets, prolonging their exposure to losses. Economic uncertainty and reduced revenues could tighten credit conditions for SMEs, as banks may view them as riskier. This limits investment in innovation or market expansion, critical for competitiveness.

SMEs in export-dependent regions may face disproportionate effects, reducing local economic activity and consumer spending, further straining small businesses in retail or services. While some SMEs might adapt by targeting domestic or alternative markets, their limited resources and dependence on larger exporters make them particularly vulnerable.