A Wake-Up Call for German Machinery: What the new EU-US Trade Deal Really Means

From Tariff Threat to Strategic Turning Point

A new chapter in EU–US trade begins on Friday, 1 August. The recently signed agreement, concluded on 27 July, marks a shift that German industrial exporters cannot afford to ignore. A last-minute compromise avoided a looming trade war by introducing a 15% US import tariff on nearly all EU industrial goods, which is still significant but far less than the previously threatened 30%.

But for Germany’s machinery and industrial equipment manufacturers, the export-driven backbone of the European economy, the implications are complex. As a Partner at H&Z and long-time advisor to this sector, I want to offer a sober but forward-looking analysis.

1. Exports Under Pressure, but Still Moving

The immediate impact of the 15% tariff is clear: German machinery is becoming more expensive in the US market. The US has long been the most important non-European export destination for many mid-sized and large German manufacturers, with exports exceeding €35 billion in 2023 alone.

Now, with a 15% tariff on top, companies must decide:

• Pass the cost on to US customers and risk losing competitiveness?
• Or absorb it and take a hit on margins?

Neither option is ideal, especially for specialized medium-sized enterprises (Mittelstand), which already face global pricing pressure. Margins will shrink, and some investments may be paused or canceled.

Yet, the industry avoided a deeper blow. The original threat of 30% across-the-board tariffs would have been catastrophic. In that sense, this deal represents damage control. It is still painful, but ultimately survivable.

2. From Trend to Necessity: “Local-for-Local” Takes Center Stage

The 15% tariff has one clear consequence: local production in the US becomes a strategic imperative.

The “local-for-local” approach, meaning producing where one sells, has been accelerating in recent years, driven by geopolitical uncertainty and reshoring trends. It is now becoming essential, particularly for companies that want to remain competitive in public tenders governed by Buy American provisions.

Many German firms had already made moves in this direction, building out facilities in states like Texas, South Carolina, or Michigan. These players are now in an advantageous position:

• They bypass import tariffs.
• They qualify as domestic suppliers.

• They gain faster access to local customers.

   

Others must now catch up. And that requires more than just capital. It takes strategic clarity, operational agility, and regulatory understanding. At H&Z, we’re helping many clients rethink their global footprint strategies right now.

3. Tariff Details Matter: Not All Machines Are Equal

An underappreciated detail of the deal is that certain sectors and product groups remain tariff-free, including semiconductor manufacturing equipment and selected automation technologies.

This offers real opportunities for some firms. If your equipment can be reclassified under one of these exceptions, or if your product configuration allows for modular delivery that reduces tariff exposure, the difference can be dramatic.

This is where technical detail and strategic trade planning intersect. Now is the time to review customs codes (HS codes), product portfolios, and supply chains, not just at the strategic level, but line-by-line.

4. Eastern European Suppliers: Caught in the Middle

The new reality affects more than just direct exporters. Eastern European suppliers, especially in Slovakia, the Czech Republic, and Romania, face indirect risks.

Many German machinery firms have long relied on low-cost, high-quality manufacturing capacity in Eastern Europe. The typical setup: parts produced in Brno or Košice, final assembly in Bavaria, and then exported to the US.

Now, every extra border in the supply chain potentially adds tariff exposure. Complex, cross-border production flows, once an efficiency advantage, are becoming cost traps.

This could accelerate nearshoring back to Germany or encourage direct investment in North America. Either way, Eastern European plants may see order volumes decline unless they too can move closer to the end customer.

5. Buy American Meets EU Commitments: A Risky Trade-Off

The deal includes more than just tariffs. The EU committed to massive US imports, including $250 billion in energy such as LNG, oil, and uranium, as well as an undisclosed amount of military procurement.

While this helped soften the tariff blow, it also means that European suppliers face shrinking market share in strategic sectors. From defense contractors to energy technology firms, many will find themselves excluded not because of price but because of politics.

Worse, the US reserves the right to reimpose higher tariffs if the EU fails to meet its purchase promises. For industrial exporters, that’s a ticking time bomb.

The message? Trade policy risk is here to stay. Companies must now factor geopolitics directly into their growth models and regional strategies.

6. A Sector in Motion and in Transition

Despite all challenges, we also see real opportunities for proactive companies.

Those with US-based production, strong local partnerships, or flexible supply chains are better positioned than ever. Their products remain competitive, their lead times are shorter, and they check the “local sourcing” box many US buyers now demand.

The trade deal may even accelerate broader trends such as regionalization, automation, and supply chain diversification, which H&Z has been tracking closely for years.

We believe German engineering remains a global benchmark. But in today’s world, it is not enough to deliver quality. You must deliver it under new rules of origin, political scrutiny, and cost pressures.

Final Thought: This Is a Wake-Up Call

The 2025 EU-US trade deal isn’t a disaster, but it is a clear signal that the golden era of free transatlantic trade is over.

German machinery firms must now pivot quickly:

• Rethink US market strategies
• Review customs classifications
• Rebalance supply chains

• Reinvest in local capacity

   

At H&Z, we see this as more than a challenge. It’s an inflection point.

Yes, tariffs hurt. But they also force clarity. They separate the reactive from the proactive.

And those who act now smart, fast, and with strategic intent can turn this headwind into a long-term competitive advantage.
Our role as advisors is to help you make that transformation, not just to cope with change, but to lead it.

Let’s get to work.