US Tariffs Impact German Machinery Sector with Declining Orders

The German machinery and equipment sector is facing significant challenges as a result of the ongoing tariff disputes with the United States. Recent data indicates a notable decline in orders, with a seven percent decrease in order intake reported for August, according to the VDMA, the German Engineering Federation. This reduction reflects a five percent drop in domestic orders compared to the same month last year, while foreign orders fell by eight percent.

In contrast, orders from the Eurozone have improved, increasing by twelve percent. However, transactions with countries outside the Eurozone have suffered, demonstrating a sharp decline of fifteen percent. Johannes Gernandt, chief economist at VDMA, noted that the unpredictable nature of U.S. tariff policies is likely contributing to a decrease in international orders.

The machinery and plant engineering industry is critical to the German economy, employing approximately 1.2 million individuals. This export-driven sector, which includes a mix of small and medium-sized enterprises and larger corporations such as Siemens, is particularly vulnerable to the ramifications of the tariff conflicts with the U.S.

In light of these developments, VDMA has revised its production forecasts for the year, now anticipating a price-adjusted decline of five percent. Looking ahead to 2026, the organization expects a modest recovery with projected production growth of one percent.

Despite existing trade agreements between the EU and the U.S., which generally impose a fifteen percent tariff on imports, the U.S. government, under the previous administration, has implemented significantly higher tariffs of up to fifty percent on various products, including machinery components. Currently, around thirty percent of machinery imports from the EU to the U.S. are subject to these elevated tariffs on their metal content, affecting a range of products such as engines, pumps, industrial robots, as well as agricultural and construction machinery.