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German exporters are growing increasingly pessimistic as U.S. tariff threats remain unresolved, according to June data from the Ifo Institute. The closely watched Export Expectations Index dropped from -3.0 in May to -3.9, marking the second consecutive month of decline and signaling weakening confidence among manufacturers amid growing geopolitical and trade friction.
A Return to Tariff-Era Tensions
President Donald Trump’s revived tariff policy targeting key trading partners, including the EU, has reignited concerns across German industry, particularly within the automotive, industrial machinery, and chemical sectors—cornerstones of Germany’s export economy. The administration’s stated goal remains the reduction of the U.S. goods trade deficit with the EU, but insiders suggest that a baseline 10% reciprocal tariff is increasingly likely, even under a negotiated agreement.
If implemented, these tariffs would:
- Exacerbate cross-border tax complexities, particularly in customs valuation and indirect tax treatments.
- Drive up compliance costs for multinationals managing intercompany transactions within the EU-U.S. corridor.
- Create new layers of supply chain distortion in sectors already impacted by post-COVID reshoring trends and China decoupling strategies.
German Carmakers in the Crosshairs
The German auto industry, which exported over €120 billion in vehicles to the U.S. in 2024, would face some of the most direct impacts. A flat 10% tariff could significantly erode competitiveness, particularly against Japanese and Korean automakers who may strike more favorable bilateral trade terms with the U.S.
This also complicates transfer pricing strategies for German OEMs and suppliers with U.S. affiliates, as profitability shifts and customs duties could prompt adjustments to existing tax and royalty structures.
Tax and Trade Implications for Multinationals
For tax professionals and CFOs of multinational groups, the uncertainty presents several high-priority action items:
- Scenario planning for multiple tariff thresholds (10%, 15%, etc.)
- Revaluation of intercompany pricing policies and customs classifications
- Reviewing double tax treaties for compensating mechanisms
- Revisiting EU-U.S. FDI structures and whether profit reallocation models are still viable
The potential imposition of reciprocal tariffs also challenges existing assumptions about the predictability of the EU-U.S. trading environment, making it necessary to diversify export markets and reexamine the legal bases for cross-border supply chain agreements.
Next Steps: Awaiting Resolution
While EU and U.S. officials remain in active talks, expectations are low for a quick resolution. Five sources close to the negotiations indicated that European policymakers are preparing for non-zero tariffs as the new status quo.
As of late June, no deal has been finalized, leaving German exporters—and the multinationals that depend on them—facing an increasingly murky transatlantic trade landscape.
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