Customs compromise with the USA: German companies very worried!

Customs compromise with the USA: German companies very worried!

The recent tariff compromise between the European Union and the United States is causing concern and doubt in the German economy. How TRT reports, many companies fear that the new regulation will severely impact the competitiveness of European economic activities. A survey-based analysis by the German Chamber of Commerce and Industry (DIHK) shows alarming trends that are further weakening trust in transatlantic trade relations.

In a survey carried out at the beginning of August 2023, over 3,500 German companies - mostly from industry - gave their opinions on the effects of the tariff compromise. Results from this survey show that 55 percent of companies see the agreement as too much of a burden, while 54 percent that do business directly with the US say they want to do less trade with the US. DIHK foreign trade chief Volker Treier is critical of US trade policy and emphasizes that it is aimed at isolation and has negative consequences for economic relations between Europe and the USA.

Criticism and uncertainty

The survey also shows that 17 percent of the companies surveyed with US business plan to postpone investments in the USA. Nine percent said they would reduce their investments. DIHK General Manager Helena Melnikov summarizes the feedback: Only five percent of companies expect positive effects from the customs agreement. What is alarming is that 72 percent of companies are already feeling negative effects of US trade policy. Companies with direct US business are particularly affected, with nine out of ten reporting negative effects.

The main focus of the uncertainty lies in the increased tariffs and the associated bureaucracy. 72 percent of those surveyed see the US base tariff rate of ten percent and the upcoming increase to 15 percent as a significant burden. Melnikov describes the agreement as a “bitter pill,” which underlines the dissatisfaction among German companies.

Trade with the USA at risk

Another result of the survey shows that 31 percent of companies with US business want to change the way they deal with US tariff costs. Of these, 62 percent plan to pass on the customs costs to customers. Many companies are forced to adjust their pricing policies to cushion the higher costs. This could ultimately lead to an increase in prices in the US and contribute to inflation.

Despite the challenges, almost two thirds of German companies are considering opening up new markets, with the European internal market being valued as a stable economic area. Countries such as Mexico and Canada as well as the Asia-Pacific region are also becoming increasingly important. These developments illustrate that the German economy is looking for new trade opportunities, while at the same time pointing to the need for stability and predictability in trade policy direction.

Overall, it remains to be seen how transatlantic trade relations will develop. The companies are calling on politicians to improve the framework conditions in order to create a reliable basis for business relationships. There is a lot of uncertainty and many are already thinking about fundamentally rethinking their strategy regarding the US market.