Supply chains and location decisions of German companies in the context of Trump's US trade policy

Trump's tariff hammer hits German industry: Are companies now fleeing the US? ### Made in the USA instead of Made in Germany: The high price our companies pay for the US market ### Germany as a business location in crisis: How Trump's policies are driving our companies to Eastern Europe ### Cost explosion due to Trump's tariffs: Who ultimately pays the price – you or the companies? ###

Tariffs, supply chains, strategy: Germany's global challenge

US trade policy under President Donald Trump has plunged transatlantic economic relations into a new era of uncertainty since 2025. At the heart of the tensions are drastic trade tariffs of up to 50 percent, which specifically target key sectors of the German export economy, such as the automotive industry and mechanical engineering. For the heavily export-oriented German economy, whose success is closely tied to the US market, this creates a strategic dilemma of historic proportions: How can it retain its most important non-European sales market without losing its competitiveness under the burden of tariffs?

This new reality is forcing German companies to fundamentally rethink their supply chains and location strategies, which have evolved over decades. The crucial question is: How are they responding to this economic pressure? What adjustments are they making to their global supply chains? Are production sites being relocated, and if so, where – to the USA to avoid tariffs, or to lower-cost regions like Eastern Europe to secure margins? And what long-term consequences will this development have for Germany itself as an industrial location?

The following text analyzes the profound impact of US trade policy and highlights the diverse strategies German companies are using to strengthen their resilience. From relocating production to market diversification to innovative customs management – it reveals a profound change that will shape German industry for years to come.

Germany's exports in transition: Consequences of US Trump tariffs for supply chains

What changes in the supply chains and location strategies of German companies can be observed as a result of US trade policy under President Donald Trump since 2025? What are the effects of the high US trade tariffs, and how are German companies responding to them in their export and pricing strategies? These questions are at the heart of the current economic analysis in light of the recent tariff fluctuations and political uncertainties in transatlantic trade. In the following, the key interrelationships are systematically examined, questions are posed, and direct answers are provided.

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How do the new US tariffs affect German supply chains?

The US administration under Donald Trump has imposed tariffs of up to 50 percent on selected European products, particularly steel and aluminum, and also established a base tariff rate of 15 to 27.5 percent on vehicles. Such measures are leading to noticeable cost increases along the entire value chain for German exporters. The automotive industry, mechanical engineering, the chemical industry, and suppliers are particularly affected.

Trump justifies the tariff policy with the goal of strengthening US industry and strategically expanding domestic production. From a German perspective, the US has traditionally been one of the most important export markets. Many German companies are closely intertwined with US supply chains and customers. However, the massive tariffs and increased political uncertainty have destabilized supply chains and significantly dampened the willingness of German companies to invest in the US market.

As an immediate measure, some companies have implemented "export in advance," supplying the US with products before the new tariff levels come into effect. In the longer term, supply chains will be restructured, new markets opened up, and production steps regionalized or relocated abroad.

How do US tariffs influence the decisions of German companies regarding production locations?

The strategic pressure to relocate to the USA is palpable among large corporations, especially in the automotive industry. Audi, Mercedes-Benz, and Volkswagen have developed or implemented plans to build new plants in the USA or expand existing ones. This creates local value creation, which reduces the tariff burden, since vehicles and parts "Made in the USA" are exempt from many US tariffs.

But the majority of German companies remain cautious. According to recent surveys, around a third have put their planned US investments on hold, while 15 percent have abandoned their plans entirely. Relocating production is often impractical for small and medium-sized enterprises – due to cost reasons, a lack of skilled workers, and uncertain local conditions.

Similar trends are evident in mechanical engineering. Some German mechanical engineering companies are investing in US subsidiaries to ensure market proximity and duty-free access. At the same time, the attractiveness of alternative locations is increasing: Eastern Europe, Mexico, and increasingly Poland are being preferred as production sites. Reasons include lower costs, stable legal frameworks, and proximity to key sales markets.

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What alternative strategies are German companies pursuing in light of the tariffs?

Many companies are diversifying their supply chains and entering new markets to minimize risks posed by the volatility of US trade policy. This is evident, for example, in the increasing focus on Europe, Asia, and Latin America. Reshoring, nearshoring, and friendshoring are strategic options that companies are using to reduce their dependence on uncertain markets.

New suppliers are being sought and alternative production sites are being developed to ensure delivery capacity and flexibility, as well as to mitigate cost increases due to tariffs. As a result, value creation is once again more strongly tied to Europe or deliberately relocated to less expensive third countries.

Eastern Europe, especially Poland, has become a preferred production location for German companies. Product quality, low costs, and state-of-the-art infrastructure are arguments in favor of relocating production processes to Poland or other Eastern or Central European countries.

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What financial and structural consequences do the tariffs have for German companies?

The direct cost increases resulting from the US tariffs are significant. Model calculations predict a 0.3 percent decline in GDP for the German economy and a 0.6 percent decline in exports in the first year. Particularly severe effects are expected for the automotive and mechanical engineering industries, whose exports to the US could decline by around 25 percent.

On the one hand, the price adjustments affect end customers, and on the other, margins for exporters are noticeably squeezed. Companies are faced with the decision of whether to pass on the additional costs or reduce their own margins. Both lead to competitive disadvantages. The situation is exacerbated by rising transport, energy, and labor costs.

The tariffs also indirectly impact the entire European industrial landscape, as they create price pressure and divert export flows. Products originally intended for the US market are increasingly being offered in Europe, thus increasing domestic competition. However, the tariffs do not affect all industries equally, but rather key sectors such as vehicles, machinery, and the metalworking industry.

How do German companies react to distribution costs and price adjustments in the USA?

Companies choose different strategies to offset the higher costs caused by tariffs:

• Price increases are sometimes passed on to consumers, especially if the products remain competitive even with tariffs. Examples from the automotive industry show that US customers thus bear some of the additional costs.
• In other cases, companies incur costs and reduce their margins in order not to lose market share in the important US market.
• Detailed contract design, transparent transfer pricing and the targeted separation of price components (such as software components, services, licenses) reduce the basis for assessing the customs burden (“First Sale for Export”).
• For technologically complex goods, tariff classification and the use of exceptions and special provisions can make a significant difference.
• Efficient customs management is now part of a sustainable international tax and supply chain strategy. Companies are combining customs, tax, and contract law, exploring the use of free trade zones, or reorganizing their supply chain structure through nearshoring and location diversification.

What impact do the tariffs have on employment and locations in Germany?

The outsourcing of production steps and investments abroad is increasingly linked to job cuts or a dampening of investment willingness at home. Companies such as Knorr-Bremse, Miele, and Bosch are relocating parts of their production to Poland, leading to job losses in Germany and accelerating structural change. According to the German Chamber of Industry and Commerce (DIHK), more than a third of companies are currently planning to relocate production abroad for cost reasons, a record high since the 2008 financial crisis.

Territorial relocations mean that job growth is occurring primarily in Eastern Europe, India, Mexico, and other parts of Asia, while Germany is losing ground as an industrial location. Energy market and bureaucratic problems are further drivers of relocation.

Are there industry-specific differences in location decisions and impacts?

Yes, especially large automotive companies and mechanical engineering companies from Germany are increasingly choosing the option of a US production facility to avoid tariffs. Medium-sized companies, on the other hand, are placing greater emphasis on market and supply chain diversification.

Pressure from the US government is particularly intense in the high-tech and electrical engineering sectors, leading to increased investment in local factories. Sectors with high capital intensity and complex supply networks are the hardest hit. The food industry and the chemical sector are showing ambivalence, as they are partly switching to export markets outside the US or passing on the costs.

How does German industry generally assess the future of the US location?

Despite current pressures and political uncertainties, the US remains the most important foreign sales market for German companies. However, the willingness to expand is declining, and many investments are being postponed or reassessed. A lasting and reliable customs policy is crucial for continued investment willingness. Companies urgently expect clarity on the practical implementation of the new energy and investment commitments under the US-EU tariff agreements.

Many companies are now focusing on strategic adjustments and new market assessments, intensive location analysis, and the development of resilient, flexible supply chains. The transformation requires investments in innovative, modular, digital solutions and the expansion of systemic competencies. Those who want to survive in the future market of the USA must deliver quality, innovation, speed, and cost-effectiveness.

Location optimization: German companies between the USA and Europe

US trade policy under President Trump has led to profound changes in the supply chains and location structures of German companies. The most important developments are the diversification of markets and supply sources, increased investment in Eastern Europe and Mexico, the dampening of the US investment climate, and innovative price adjustment and tariff optimization strategies. At the same time, competitiveness remains threatened by rising costs. The future will be characterized by a stronger positioning in resilient, digitized, and sustainable value networks – both in Europe and globally. Companies must develop flexible strategies to respond to the uncertainties of political and economic developments in international markets.

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