Small and Medium-Sized German Enterprises Leverage Specialty Markets to Navigate Trump's Tariffs

German SMEs Cope with US Tariffs Amid Optimism

Small and medium-sized businesses (SMEs) in Germany, often family-run and highly specialized, are expressing confidence that their unique products will continue to sell despite the U.S. tariffs.

These niche firms, protected under the new Trump tariffs due to their specialization in specific markets, are hopeful of weathering the storm. Most sectors face a 15 percent tariff, but niche companies with unique products or market positions experience less impact and can often pass on costs or avoid direct competition with heavily taxed sectors like automotive or semiconductors.

Jan-Philipp Gillmann, an executive at Deutsche Bank, noted that German SMEs are somewhat protected due to their specialization. This sentiment is echoed by Brian Fuerderer, the CEO of Microqore Medical, a high-tech surgical equipment manufacturer with 32 employees. Fuerderer states that there aren't many comparable products to what Microqore Medical makes in Germany when it comes to medical technology.

Fuerderer further adds that for companies with a real niche, demand may continue as before, even with tariffs. This optimism is shared by Thorsten Bauer, co-head of laser manufacturer Xiton Photonics, a SME based in Kaiserslautern with about 20 employees. Bauer states that his company does not notice the impact of the tariffs as the customer pays the tariff.

The hope is that in niche sectors, American customers have no obvious alternatives, and will continue to purchase these products despite higher prices due to tariffs. However, despite the optimism of some German SMEs, tariffs and the recent months of uncertainty surrounding them have not left these businesses completely unscathed.

Under a framework agreement reached in late July, EU exports will face U.S. tariffs of 15 percent starting next Thursday, which is higher than traditional tariffs but far lower than the 30 percent former president Donald Trump had threatened to impose. This uncertainty surrounding tariffs has already had an impact on the trading relationship between the United States and Germany, as the U.S. is Germany's largest trading partner.

The German "Mittelstand" (middle class) is the backbone of Europe's top economy. Despite the challenges, these SMEs are typically highly specialized, sometimes being the only companies making a particular component. Tariffs imposed by Trump have amounted to billions of euros for some German companies.

However, the strong optimism of "Mittelstand" companies contrasts with the difficulties faced by larger German giants such as carmaker Volkswagen. Fuerderer suggests that U.S. tariffs would have to rise to 30 percent or even 40 percent before American customers would reconsider purchasing German products.

Trump's claims that foreign companies will pay the tariffs are contradicted by the strong optimism of "Mittelstand" companies. The cost of the tariff will often be borne by the consumer, according to Gillmann. For companies with a real niche, demand may continue as before, even with tariffs. This resilience is a testament to the adaptability and resourcefulness of Germany's SMEs.