German Manufacturing Fears New US Customs Duties

German manufacturers are worried about new tariffs in the US but expect that these will have little effect on sales.

According to Ifo, a minority is considering production shifts to the US. This is the result of a new survey conducted by the Ifo Institute among 2700 companies in the manufacturing sector. According to the survey, nearly 45 percent expect completely new customs duties, and 36 percent anticipate an increase of existing customs barriers. The introduction of other trade barriers is expected by 37 percent, whereas 28 percent foresee no changes (multiple responses were possible). “The companies do not seem to be over-concerned. Only 18 percent expect a drop in sales, but 6 percent expect an increase and 76 percent foresee no change”, says Gabriel Felbermayr, Head of the Ifo Center for International Economics.

At the same time, some shift in production to the US is conceivable. About 46 percent of the manufacturing companies stated that they export to the US. Of these, 21 percent believe that they will produce more in the US as a result of the new US trade policy. An additional seven percent of the companies already active in the US stated that they would set up (further) subsidiaries in the US. In total, almost 28 percent of German manufacturers active in the US plan to increase their value added there.

Some 38 percent of German industrial companies regard the US as an important or very important export market. These are mainly larger companies, as they employ 71 percent of the workers in the industry. Conversely, imports from the US play an important or very important role for only 13 percent of the companies – these firms employ 41 percent of the industry workforce. For 14 percent of German industrial companies, the US is also an important or very important production site. These are mainly large companies, as they employ 63 percent of domestic workers in the industry.

Image: Samuel Zeller - Unsplash.com

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