The first year of Donald Trump’s second term has been anything but calm amid a flurry of executive orders by the US president targeting alleged “opponents” at home and abroad, and negatively affecting transatlantic trade and business.
Trump’s so-called Liberation Day announcement of “reciprocal tariffs” last April shocked governments and companies alike across the world, as did his crackdown on corporate diversity, equality and inclusion (DEI) initiatives.
German companies operating in the United States, for example, are now wondering whether they can maintain their diversity or equality programs amid Trump’s “anti-woke” push that seeks to punish companies for a progressive staffing policy.
At the same time, however, the past year has shown that not every wish of Trump needed to be carried out, as even unfulfilled threats have served their purpose of unsettling competitors and strengthening US negotiating positions.
But how exactly are Trump’s bullying tactics affecting German companies, and are they strong enough to withstand the pressure?
American jobs at stake
According to the German Chambers of Commerce Abroad (AHK), which represents German business interests overseas, the mood among German firms in the US “remains tense,” with the trade group saying in its World Business Outlook Fall 2025 that Trump’s tariff threats rank among the “biggest burdens” to their business.
Nevertheless, Christoph Schemionek, head of the AHK in Washington, stresses that the US remains a key market for German companies.
“We are heavily invested here. Germany is now the third-largest foreign direct investor [in the US], behind Japan and Canada,” he told DW.
Even more significant, he added, are the employment opportunities created by German companies, which amounted to “almost 1 million American jobs.”
“This is exactly what the president wants, what he ran on [in his campaign],” said Schemionek.
At the same time, Trump’s tariff policy is proving counterproductive in some areas because the higher tariffs are making it difficult to import, for example, machinery into the US, which would “slow down the reindustrialization of the country,” he said.
Deteriorating business climate
Germany Trade and Invest (GTAI) — German state-owned agency for foreign trade and investment promotion — paints a similarly mixed picture.
GTAI’s trade expert Roland Rohde says that even though the US market has remained Germany’s largest export destination, business conditions have “deteriorated significantly.”
Data published by the German Statistics Office (Destatis) shows that German exports to the US fell by 7.5% year-on-year in the first 10 months of 2025.
“Over the course of the year as a whole, sentiment among German companies has clearly worsened,” Rohde told DW.
Different outcomes
As the US tariff policy is the dominant challenge for German firms trading with or operating in the United States, Rohde sees their impact varying widely among the different sectors.
The German automotive industry, he explained, is exempt from the 50% tariffs on steel and aluminum Trump has imposed, paying only a 15% general tariff on EU exports to the US. But due to tough competition in the US market, carmakers are unable to roll additional tariff costs over onto their products.
By contrast, in the mechanical engineering sector, roughly half of all German machinery exports to the US are affected by steel and aluminum tariffs, he added.
Additionally, machine builders would have to cope with high administrative costs, as the metal content and origin of their machinery must be documented for every component, virtually “down to the last screw.”
What helps them in this situation, said Rohde, was the fact that they often supply highly specialized products for which there is little competition on the US market. This allows them to pass on a large share of the tariff costs to customers.
Limits to reshoring
Trump has repeatedly urged foreign companies to produce more goods in the United States to avoid higher import tariffs. But Schemionek argues that under those so-called reshoring efforts, it might make sense to “shorten supply chains — but only up to a point.”
The types of highly specialized machines produced in Germany, Japan, South Korea, or Italy are simply not available in the US, he said, nor can they easily be manufactured there. “The supply chains and the know-how are missing [in the US] because they are based on decades — sometimes centuries — of accumulated experience.”
Rohde agrees, noting that German mechanical engineering firms are unlikely to expand production capacity in the US, not least because skilled labor is in short supply there.
‘Comply with the law’ seems essential
DW reached out to several German companies to find out how they view current business conditions in the US.
German flag carrier Lufthansa, for example, said that capacity growth on North Atlantic routes is running above average, with an increase of 6%. “People still want to fly, including to America,” the airline said in a statement. Regarding diversity policy, the airline merely stated that it “generally complies with statutory requirements.”
Premium automaker Mercedes responded to the same question in the same fashion, saying its US diversity programs and initiatives were “in line with applicable legal requirements.”
Chemical company BASF said it complies with the laws of the countries in which it operates — just as Deutsche Telekom subsidiary T-Mobile US, which noted that it “always complies with the laws and regulatory frameworks” in its markets.
On outlook, Mercedes said it is responding to changing markets by focusing more strongly on regional demand and growth opportunities, while BASF emphasized the continued importance of the US market and pointed to plans to expand production capacity in Louisiana, with commissioning scheduled for 2026.
So, despite the challenges posed by Donald Trump’s erratic trade policy, GTAI’s Rohde does not expect a dramatic pullback in bilateral trade and business.
German automakers, he said, would plan to expand US production, albeit “within manageable limits,” as Trump’s tariffs “divert capital that would otherwise flow into investment.”
Overall, Rohde remains cautiously optimistic that the US will remain a “large and attractive sales market.”
“Against this backdrop, German companies are likely to strengthen their engagement in the US in the foreseeable future,” he added.
This article was originally written in German.
