Trump’s Tariffs Cast A Long Shadow Over Germany’s Export-Reliant Economy – OpEd
Germany has long relied on exports to generate growth. Automotive manufacturing, mechanical engineering, and chemicals have defined its economic success for decades. However, recent trade data reveals a concerning shift. The United States, once a reliable market for German goods, has become a burden due to tariffs under President Donald Trump.
In July 2025, Ursula von der Leyen and Trump reached a trade agreement in Scotland. It established a baseline tariff of 15 percent on most EU goods entering the US. While this rate halved an earlier threat, it significantly increased costs compared to previous levels. The deal required the EU to eliminate tariffs on American industrial products and commit to large-scale purchases of US energy. Many in Europe viewed the agreement as unbalanced, yet it prevented a full-scale trade war.
The impact soon became evident in German export figures. Data from the Federal Statistical Office for October showed a slight 0.1 percent month-on-month increase in total exports to 131.3 billion euros. However, this growth was driven primarily by sales within the EU, which rose by 2.7 percent. Deliveries to non-EU countries fell by 3.3 percent. Specifically, exports to the US dropped by 7.8 percent to 11.3 billion euros, reaching their lowest level in years on a seasonally adjusted basis.
This decline continued a broader pattern. Earlier in the year, exports to America had collapsed in some months by over 20 percent year-on-year. A brief recovery in September proved temporary. Analysts noted that higher tariffs and a stronger euro made German products less competitive. Dirk Jandura, President of the Federation of German Wholesale, Foreign Trade and Services (BGA), emphasized that Germany was losing market share in key non-EU regions, particularly in the US and China.
The automotive sector suffered the most. German manufacturers are heavily dependent on the American market. Volkswagen warned that tariffs could cost the company up to 5 billion euros in 2025. Its profits in the first nine months of the year plummeted by 58 percent. During the same period, Mercedes-Benz saw its net profit halved, and Porsche recorded a dramatic decline in operating profit. The German Association of the Automotive Industry (VDA) expressed disappointment, noting that the 15 percent tariff rate far exceeded previous levels. Additional levies on steel, aluminum, and components further intensified the pressure.
Mechanical engineering faced similar hardships. The VDMA, which represents thousands of companies, predicted a 5 percent production decline in 2025. This would continue a contraction that began in early 2023. Surveys indicated that two-thirds of firms expected revenue losses due to tariffs, with many anticipating drops of over 10 percent. Bureaucratic requirements for proving the origin of materials further complicated the situation.
Chemical producers also faced challenges. Sales to North America weakened, contributing to expected production declines. These industry-specific problems fed into broader economic weakness. Germany's Gross Domestic Product stagnated in the third quarter of 2025 following an earlier contraction. Forecasts for the full year suggested zero or minimal growth, marking the third consecutive year without expansion. While high energy costs and weak global demand compounded the issues, tariffs emerged as a central factor. Economists such as Carsten Brzeski of ING argued that exports, once a reliable engine of growth, would not return quickly amid geopolitical tensions and supply chain shifts.
Investment sentiment deteriorated accordingly. Surveys showed more firms planning budget cuts than increases, particularly in the manufacturing sector. Uncertainty in trade policy stifled spending. The tariffs underscored Germany's vulnerability, as the economy remains deeply integrated into global trade. With nearly a quarter of German jobs dependent on exports, disruptions in markets like the US have far-reaching effects.
Some adjustments have taken place. Exports to EU partners helped cushion the decline in recent months, but this did not fully replace the lost demand from elsewhere. Calls to strengthen domestic and European markets, alongside reforms to boost competitiveness, grew louder. Transatlantic relations have entered a new phase of friction. While the agreement prevented a worst-case scenario, it left many ambiguities. European leaders have called for protection against future increases, and business associations are pushing for a stronger EU response to protect vital industries.
Trump's approach aimed to reduce US trade deficits and promote domestic production. For Germany, it accelerated structural challenges. Declining investment attractiveness and persistent policy uncertainty threatened long-term prospects.
Developments through the end of 2025 showed no sign of rapid relief. Export data through October confirmed ongoing pressure on shipments to the US. The outlook for major sectors remains cautious, with the mechanical engineering industry bracing for a prolonged downturn.
Germany now faces difficult adjustments. Exploring new markets and strengthening domestic demand offer potential paths forward. However, the immediate damage caused by tariffs highlights the risks of protectionism in an interconnected world. Europe's largest economy, long a symbol of export-driven excellence, is now grappling with a transformed global environment shaped by decisions made across the Atlantic.