Germany’s Industry Is Optimistic Following Friedrich Merz Visit To The U.S.

German industry is cautiously optimistic following Chancellor Friedrich Merz’s visit to the U.S. on June 5, 2025, where he met with President Donald Trump to discuss trade, among other issues. Merz, a staunch advocate for free trade, pushed for a reduction in U.S. tariffs, particularly the 25% levy on imported vehicles and parts and the 10% tariff on other goods, which significantly impact Germany’s export-driven economy, especially its automotive sector. These tariffs, combined with a 50% duty on steel and aluminum, threaten German manufacturers, who employ around one million people in the U.S. through their operations.

During the visit, Merz and Trump agreed to strengthen cooperation on trade, with Merz expressing hope for progress before the EU-U.S. trade deal deadline of July 9, 2025. He emphasized a “zero-for-zero” tariff approach, aiming to eliminate industrial duties entirely, a stance he reiterated in discussions with European Commission President Ursula von der Leyen. German industry leaders, particularly in automotive and manufacturing, are hopeful this signals a path toward de-escalation, as a trade war would exacerbate existing challenges like high energy costs and declining competitiveness.

However, Merz warned that the EU could retaliate against U.S. tech companies if trade tensions escalate, pointing to the U.S. services trade surplus as a potential target. While the talks were described as “extremely satisfactory” by Merz, with Trump praising their personal rapport, no concrete agreements were announced, leaving industries awaiting tangible outcomes. The German automotive sector, a cornerstone of the economy, remains particularly vulnerable, with exports to the U.S. valued at €157.9 billion in 2023. Progress in upcoming EU-U.S. negotiations, potentially discussed at the G7 and NATO summits in June, will be critical for German industry’s outlook.

The implications of German Chancellor Friedrich Merz’s U.S. visit and the push for trade talk progress are significant for German industry, the EU, and global trade dynamics. Progress toward a “zero-for-zero” tariff deal could reduce or eliminate U.S. tariffs (e.g., 25% on vehicles, 10% on goods, 50% on steel/aluminum), protecting Germany’s €157.9 billion export market to the U.S., especially for automakers like Volkswagen, BMW, and Mercedes-Benz. Lower tariffs would safeguard jobs and competitiveness, critical amid Germany’s economic stagnation and high energy costs.

Failure to secure concessions could intensify trade barriers, raising costs for German manufacturers and potentially forcing production shifts to the U.S. or other markets. A trade war would exacerbate pressures on an already struggling industrial base, with ripple effects on supply chains and SMEs. Successful talks could strengthen EU-U.S. trade ties, aligning with Merz’s and von der Leyen’s goal of a broader industrial tariff agreement by July 9, 2025. This could stabilize transatlantic economic relations and counterbalance China’s trade influence.

If negotiations stall, Merz’s warning of EU retaliation against U.S. tech giants (e.g., Google, Apple) could spark a broader trade conflict, disrupting the U.S.’s services surplus (€70 billion in 2023) and escalating tensions. This tit-for-tat risks fracturing EU-U.S. economic cooperation. A de-escalation in U.S.-EU tariffs could set a precedent for multilateral trade agreements, encouraging open markets globally. Conversely, a breakdown could embolden protectionist policies, disrupting WTO frameworks and global supply chains, particularly in automotive and tech sectors.

Emerging markets reliant on EU or U.S. trade could face indirect impacts, as German industry’s performance influences global demand for raw materials and components. For Merz, securing trade progress bolsters his leadership and Germany’s economic credibility within the EU, especially after his recent election. Failure could weaken his coalition and fuel criticism from pro-protectionist factions. In the U.S., Trump’s willingness to negotiate may hinge on domestic political pressures, balancing his “America First” agenda with demands from U.S. industries reliant on EU imports.

Most at risk, with 25% tariffs threatening profitability and U.S. market share. A deal could preserve Germany’s 1 million U.S.-based jobs. EU retaliation could hit U.S. tech firms, raising costs for consumers and complicating digital trade. Trade stability would support Germany’s energy-intensive industries, while disruptions could worsen cost pressures. The outcome of these talks, likely shaped by G7 and NATO summits in June 2025, will determine whether German industry gains breathing room or faces heightened economic strain, with broader consequences for global trade stability.