US Tariffs Put German Economy Under Pressure

The erratic US trade policies significantly affect international business for German companies. Even the latest tariff deal between the US and the EU does not bring certainty but rather indicates that high US tariffs are becoming the norm. The EU is now required to act confidently and cohesively—not just during detailed arrangements with the US but also on a global scale to uphold WTO law and establish new trade partnerships.

The US, with its tariff policies, shakes the world trade system and impacts German companies severely; unfortunately, the latest EU-US deal does not provide a reliable foundation. The EU must act cohesively now.

This article was featured as the weekly topic in the newsletter of KW 34, 2025.

The US shakes the world trade system with its erratic tariff policies that severely impact German companies. The recent EU-US deal does not bring true certainty—high tariffs have become the new normal.

Tariffs as the New Norm

Since August, the US has imposed new tariff increases clearly violating WTO rules. While Switzerland faces 39 percent, India and Brazil 50 percent, the EU gets away with just 15 percent. For comparison: As of early 2025, US tariffs for EU imports were around 2 percent.

The consequences are dramatic: According to a DIHK snap survey, 54 percent of German businesses plan to reduce their US operations and 26 percent are suspending investments. This hits one of the most important economic relationships: In 2024, the German-American trade volume reached €252 billion, while German investments in the US amounted to €529 billion. 1.2 million German jobs directly depend on US exports.

The EU Must Act Cohesively

Only with unity can Europe leverage its large domestic market to strengthen its negotiating power. Credible deterrence through targeted counter-tariffs and utilising the EU instrument against economic coercion is essential—from import restrictions to investment limits.

Binding detailed agreements are now critical in key industries like automotive, pharmaceuticals, and steel. 77 percent of companies view trade policy uncertainty as their biggest burden. Despite the "deal," over half are suffering from significant additional costs.

Openness Instead of Isolation

Every fourth German job depends on exports—in industry, every second job. German companies need open global markets and a functioning WTO that sets tariff rules for 166 states and secures 83 percent of world trade.

But the WTO is under pressure. A collapse would be an economic disaster. The EU should increase cooperation with third countries and strengthen the rule-based order—for example, through collaboration with CPTPP-Pacific states.

Speed is also needed for bilateral trade agreements: Mercosur, Indonesia, India, Switzerland, Australia, and Malaysia are crucial for supply chain diversification and EU sovereignty. Combined with bureaucracy reduction and tax reforms, Europe will be better equipped to defend its interests globally.