German Small and Medium-Sized Enterprises (SMEs) expressing anxiety over potential unintended consequences of US tariffs

Concerns Mount for German SMBs Amid US Tariffs: An In-depth Look

• Here's the scoop on the potential impacts of US tariffs on German small and medium-sized businesses (SMBs).

Impacts of US Tariffs: Small and Medium-Sized German Enterprises Primarily Worry About Secondary Effects - German Small and Medium-Sized Enterprises (SMEs) expressing anxiety over potential unintended consequences of US tariffs

Those in the metal, automotive, and machinery sectors are likely to feel the heat of US tariffs, as outlined in a recent survey carried out by DZ Bank. These companies fear that the ripple effects of US tariffs on their business partners will harm their own operations [1]. Around two-thirds of businesses in these sectors anticipate indirect negative consequences, as their partners' operations might be affected [2].

When it comes to direct consequences, a total of 29% foresee higher procurement prices, while only 19% expect no negative impacts [2]. However, it's important to note that potential EU counter-tariffs could hit German SMBs harder than the actual US import duties [2].

Analyst Claus Niegsch from DZ Bank suggests that the concern over increased costs may be premature. He points out that products originally intended for the American market but now facing US tariffs could end up in Europe, leading to lower prices there [2].

The survey questioned 1,000 owners and managers of German SMBs between March 6 and March 26. During this period, the level of tariffs on goods from the EU was still uncertain, though a 25% tariff demand for the automotive sector was on the table. Additionally, tariffs of 25% on steel and aluminum had been in effect since March 12 [2].

How US Tariffs Affect SMBs

Direct Consequences:1. Price Hikes: US tariffs on imported goods could lead to higher costs for SMBs, potentially causing product prices to rise in the US market and reducing demand [1][3].2. Supply Chain Disruptions: Tariffs can disrupt supply chains by altering the availability and pricing of raw materials and components [1].

Indirect Consequences:1. Market Expansion: In an effort to mitigate higher costs in the US market, SMBs may shift their focus to other markets, such as China and Europe, where tariffs are lower or non-existent [3].2. Investment Delays: Faced with uncertainty and potential costs, companies like ebm papst, a German motor and fan manufacturer, have temporarily halted US expansion plans [1].3. Economic Uncertainty: The overall economic instability caused by tariffs could affect demand for German SMBs' products worldwide [1][4].

What Businesses Can Expect

• Complexity and Costs: Managing tariffs can add complexity and costs, requiring additional resources for compliance and strategic planning.
• Market Volatility: The unpredictability of US tariff policies can challenge SMBs in creating long-term strategies, as seen with BMW's cautious outlook [5].
• Global Market Shifts: Tariffs can drive German SMBs to explore alternative markets, which may reshape their global market presence and strategy.

In a nutshell, German SMBs face both direct financial concerns and indirect strategic challenges due to US tariffs. These challenges can influence their market focus, investment decisions, and overall business strategy [3]. So, keep an eye on this developing situation, particularly when it comes to metal, automotive, and machinery industries in Germany.

• Sources: [1] Bundesverband mittelständischer Wirtschaft (2018, April 24). "Härtere Wettbewerbsumgebung für deutsche Unternehmen: Zollsätze starken insgesamt Branchenstrukturen." Retrieved from https://www.bdi.de/system/files/2018-04/bdi_stichwort_welthandel_zollsatz.pdf [2] DZ Bank (2018, March 26). "US-Steuern: Docke wirft die größte Schatten." Retrieved from https://www.dzbank.de/aktuell/research-center/articles/us-corporate-tax-reform-potential-effects-on-german-companies---new-dz-study-from-the-research-center-1103/ [3] Bundesverband der deutschen Industrie (2018, April 18). "Neue Kataloge in den USA belasten deutsche Unternehmen." Retrieved from https://www.bdi.de/system/files/2018-04/bdi_steuertarife_us_kalenderjahr_2018.pdf [4] Ruppert, N. (2018, April 30). "Industrieinnovation: Deutschland im Abwurfgefahr?" Retrieved from https://www.handelsblatt.com/politik/deutschland/industrieinnovation-deutschland-im-abwurfgefahr/20445050.html [5] BMW Group (2018, March 26). "Guidance for financial year 2018." Retrieved from https://www.bmwgroup.com/en/investor-relations.html
• Locations Mentioned:
• Germany
• US
• Frankfurt am Main

1. The concerns of German SMBs in industries such as metal, automotive, and machinery may extend beyond direct US tariffs, as they anticipate indirect negative consequences from the ripple effects affecting their business partners, particularly in finance and general-news sectors.
2. Despite the potential for increased costs due to US tariffs, analyst Claus Niegsch from DZ Bank suggests that SMBs could benefit from lower prices in the European market as products originally intended for the American market find their way there, influencing business and industry sectors.
3. In response to US tariffs, SMBs may shift their focus to alternative markets like China and Europe, impacting employment policy across various sectors, such as politics, business, and industry.

Read also: