The German engineering sector is bracing for a potentially devastating blow as the US government prepares to significantly expand tariffs on a wide range of machinery and equipment, raising serious questions about the future of transatlantic trade relations. Bertram Kawlath, President of the German Engineering Federation (VDMA), warned that the impending tariff increases, slated for December, threaten to effectively eliminate the crucial US export market for numerous German companies.
The planned expansion of the “Section 232” tariffs goes beyond the existing 15% baseline established under the EU-US trade deal. Critically, the new measures include an additional 50% tariff specifically on the steel and aluminum components within exported goods – escalating costs to prohibitive levels for many businesses. VDMA calculations reveal that, if implemented, the expansion will impact over half (56%) of the German engineering sector’s US business, a substantial increase from the 40% affected after the initial tariff expansion in August.
The US currently represents the single most important export destination for the German engineering industry, accounting for 13.5% of total exports in 2024. Already, the impact of previous tariff increases is being felt, with the VDMA reporting a 7% decline in foreign trade with US clients in the first half of the year. July saw a 13% reduction in trade volume, followed by an alarming 18.5% decrease in August compared to the same period last year.
Kawlath characterized the existing EU-US trade deal as “valueless” emphasizing the urgency of renewed negotiations with the US administration. This situation highlights a growing tension: while the EU seeks to maintain a stable trade relationship with the US, the Biden administration’s protectionist measures are actively undermining that goal.
The VDMA’s criticism extends to the European Commission, with Kawlath questioning the commitment of President Ursula von der Leyen, a member of the CDU, to actively address the issue across all levels of policy. He argues that the EU must resist what he sees as a concession to unilateral US trade policies. The potential collapse of the US market for German engineering could have far-reaching economic consequences, demanding a proactive and assertive response from both the German government and the European Commission to avoid a prolonged and damaging trade war.
