The Mood Shifts: US Tariffs Dampen Hope of an Upturn

Press release from 16 April 2025
Print version (pdf)

The latest report from the German Business Panel (GBP) paints a mixed picture of the German economy: While the coalition agreement presented by CDU/CSU and SPD leads to cautious optimism among many companies, the US tariffs announced at the beginning of April are weighing heavily on business expectations, especially in export-oriented industries.

Since the collapse of the governing coalition in November 2024, companies in Germany have seen a steady decline in expected business closures: The proportion of companies that expect to continue their business activities in the next twelve months rose from 82.1% in October 2024 to 87.0% in March 2025. The background to this development is the coalition agreement between CDU/CSU and SPD presented on 9 April 2025, which contains a number of economic policy incentives. The new government plans immediate write-offs for investments, to gradually reduce the corporate income tax, and to introduce an industry price for electricity which applies to energy-intensive companies. In the immediate run-up to the coalition agreement, forecasts for sales (+1.2 percentage points), profits (+1.9), and investments (+3.1) rose significantly.

However, this upward trend is fragile. Almost at the same time, the US government under President Trump announced new tariffs against the EU, including tariffs on mechanical engineering products, automotive supply parts, and IT components. Although a 90-day tariff pause has since been announced, the uncertainty persists. In the first few days after the announcement, the proportion of companies expecting to continue their business activities in the short term fell back to 85.1 percent. At the same time, the expectations for sales and profits fell by 1.2 percentage points each.

Export-dependent sectors are particularly affected: investment expectations fell by 9.5 percentage points in the manufacturing sector and by around 3 points in the trade sector. By contrast, less export-oriented sectors – such as construction and housing – reported rising investment intentions. These could therefore benefit more from the growth-promoting measures of the future federal government, such as the planned infrastructure project. “In sectors that are dependent on exports to the US in particular, companies are being forced to postpone investments or relocate their production,” says Thomas Simon, academic staff member at the University of Mannheim and co-author of the study.

Maik Sattelmaier, also an academic staff member at the University of Mannheim and co-author, explains: “Our data clearly shows that global trade conflicts can quickly slow down an economic upturn. This not only increases the prices of products from Germany on the US market, but also the prices of imported intermediate goods and the bureaucratic effort for customs clearance.”

The uncertainty among companies is also reflected in their expected operating costs: After the federal election, many companies were still expecting relief, particularly in energy costs (-1.1 percentage points). However, the tariff announcements led to an increase in material costs (+2.7 percentage points), administrative costs (+2.9) and energy cost forecasts (+1.9).

The burdens are hitting export-oriented companies in the manufacturing and trade sectors particularly hard. They are expecting rising procurement costs, uncertain supply chains, and increased bureaucracy. “As a result of the tariff conflict, many companies will have to raise their prices, for example for IT hardware and software products. This in turn reduces sales and growth prospects for Germany as a whole,” said Professor Dr. Rostam-Afschar, the head of the study. He summarizes: “Despite positive signals from Berlin, politicians remain obliged to effectively counter global uncertainties – both through short-term support for particularly affected industries and through the strategic development of new sales markets”.

The complete report on company trends in April 2025 can be found here:  https://www.accounting-for-transparency.de/wp-content/uploads/2025/04/gbp_monitor_Apr25.pdf

Further information on the GBP monitoring report
The German Business Panel interviews more than 800 companies per month on the economic situation in Germany and collects data on 1) any expected changes in revenue, profit and investments, 2) economic decisions, 3) the expected shutdown rate in the sector, and 4) the satisfaction with the economic policy. Furthermore, GBP reports on particularly relevant questions every three months.

Background information on the German Business Panel
The GBP is the long-term survey panel of the trans-regional Collaborative Research Centre “Accounting for Transparency” (www.accounting-for-transparency.de). The Collaborative Research Center (CRC) “TRR 266 Accounting for Transparency” was established in July 2019. In May 2023, the German Research Foundation (DFG) approved the extension of four additional years. It is the first CRC with a focus on business administration. More than 100 researchers from the following eight universities are involved in the CRC: Paderborn University (host university), Humboldt-Universität zu Berlin, University of Mannheim, researchers of Ludwig-Maximilians-Universität München, Goethe University Frankfurt am Main, Frankfurt School of Finance & Management, University of Cologne and Leibniz University Hannover. The researchers examine how accounting and taxation affect the transparency of companies and how regulation and firm transparency impact our economy and society. The CRC is funded with approx. EUR 18 million.

Contact:
Professor Dr. Davud Rostam-Afschar
University of Mannheim
Phone: +49 621 181-1645
e-mail: rostam-afscharmail-uni-mannheim.de

Yvonne Kaul
Research Communication
University of Mannheim
Tel: +49 621 181-1266
e-mail: kaulmail-uni-mannheim.de