BERLIN, May 9 (Xinhua) -- Germany's manufacturing sector, long a cornerstone of Europe's largest economy, is being rattled by a fresh wave of U.S. tariffs, with small and mid-sized exporters sounding the alarm over rising costs, squeezed margins and growing uncertainty.
At Tornado Antriebstechnik GmbH, a mid-sized gearbox manufacturer located north of Berlin, production lines remain active. In 2024, the company shipped 160,000 custom units, with about 15 percent destined for the United States. But recent tariff hikes have disrupted that flow, increasing cross-border costs and complicating investment planning.
"We simply can't absorb these costs indefinitely," said General Manager Norbert Mensing, noting that the company has been forced to pass some of the burden onto customers. "We had planned to grow in the U.S. market, but now we're heading in the other direction."
Despite operating a U.S. subsidiary, Tornado has seen several key components subjected to steep tariffs, significantly inflating overall production costs. The company's U.S. expansion plans are now on hold.
"Due to the unpredictable shifts in U.S. trade policy, we are considering scaling back our American operations and refocusing our investments domestically," Mensing explained.
Tornado's predicament reflects broader unease among German manufacturers, many of whom cite erratic trade policies as a major threat to stability. The latest tariffs, billed by the Trump administration as "reciprocal," have added new friction to long-established transatlantic supply chains. While intended to address trade imbalances, the tariffs have in fact heightened uncertainty and dampened investment appetite, German firms argued.
SQUEEZED MARGINS, DEFERRED GROWTH
Germany's export-driven economy remains highly vulnerable to external shocks. While industrial giants like Volkswagen and Mercedes-Benz have the flexibility to shift production across global sites, smaller manufacturers like Tornado have far fewer options to absorb the impact.
The concerns extend across Germany's manufacturing heartland. The country is home to a vast ecosystem of "hidden champions" -- small and mid-sized enterprises that excel in niche global markets. These firms have flourished thanks to precision engineering, long-term strategic planning, and reliable cross-border supply chains.
For many of these companies, sweeping U.S. tariff hikes and increasingly unpredictable trade policies are more than just hits to profitability -- they are shaking the foundations of the global production and sourcing systems these firms rely on to remain competitive.
Hermann Simon, the economist who coined the term "hidden champions," said modern tariffs are no longer just pricing mechanisms but structural disruptors. "Supply chains are so tightly interwoven that even small disturbances can produce far-reaching ripple effects," he told Xinhua.
For companies built on trust, stability and global connectivity, uncertainty itself is more damaging than regulation, Simon warned.
CONFIDENCE EROSION
Recent data confirms the growing anxiety. In April, 28.3 percent of German firms surveyed by ifo Institute reported deteriorating business conditions, the highest share since late 2022. U.S. trade policy was cited as the leading external risk.
In the same month, Germany's federal government slashed its 2025 GDP growth forecast to zero, following contractions in both 2023 and 2024. If the forecast holds, it would mark the country's first three-year economic downturn since World War II. Officials cited U.S. tariffs as a significant factor in the downgrade.
German Economic Institute estimates that if current tariffs persist through 2028, the cumulative cost to Germany could hit 290 billion euros (about 325.48 billion U.S. dollars), around 1.2 percent of annual GDP.
The report warns that these tariff policies are emerging as catalysts for global economic disruption, eroding investment confidence, and obstructing the coordinated development of industrial ecosystems worldwide.
"Many companies' investments are being delayed or canceled," Simon said. "When companies stop expanding and start waiting, it creates a chain reaction that risks turning into a systemic drag."
INTERDEPENDENCE AND RISK
Despite rising tensions, economic ties between the United States and Germany remain strong. In 2024, the United States accounted for 10.4 percent of German exports, the highest share since 2002. Germany also recorded a record 69.8 billion euro trade surplus with the United States last year.
German executives, however, caution that unpredictable trade policies are undermining trust in the rules-based global trading system. In a world of tightly interconnected supply chains, abrupt changes do more than disruptive operations -- they threaten the foundations of long-term industrial cooperation.
The impact is particularly acute for mid-sized manufacturers like Tornado, often dubbed the "backbone" of German economy. Unlike global multinationals, these firms cannot easily relocate operations or absorb geopolitical shocks. Their competitiveness depends on stable environments, long-term investments, and deeply integrated supplier networks.
Under the current condition, Germany faces a significant challenge to defend open-market principles, rebuild industrial confidence, and support its manufacturing sector in a world where economic certainty is increasingly hard to find.
While the United States defends its "reciprocal tariffs" as a matter of fairness, critics argue the approach prioritizes national gain over global stability. The result may be counterproductive, disrupting supply chains and eventually harming U.S. consumers as well. Enditem
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