US tariffs: consequences for German companies

The recent announcements and decrees of the US administration, in particular the Executive Order signed by President Donald J. Trump on April 2, 2025, which provides for a minimum import tariff of 10 percent on all imports into the USA from April 5, 2025, create considerable uncertainty for German companies in the supply chain and for investments.

The US government's latest measure is intended to address trade deficits, promote fair competition in the US and reduce dependence on foreign production. Therefore, from April 9, 2025, higher tariffs will also be introduced for countries with significant trade surpluses with the USA. The USA has thus carried out its threat of reciprocal tariffs (reciprocal tariffs).

Germany's export-oriented economy and its considerable trade surplus with the USA make the country particularly vulnerable to the current tariff changes.

We summarize the current status and outline steps that companies should consider when assessing and managing risk in the current environment.

On March 12, 2025, the U.S. imposed additional tariffs on imports of steel and aluminum from all countries into the U.S., including products that may contain steel or aluminum. Specifically, the measures lead to:

• Re-impose a 25 percent tariff on steel products and products made from them (e.g., steel pipe, wire and tin foil) and terminate all previous country agreements.
• Raising the tariff from 10 percent to 25 percent for aluminum and increasing the tariff for other steel and aluminum products.

The tariffs affect a wide range of products, including cookware, window frames, machinery, certain electrical appliances and furniture. These measures were first announced by the US on February 12, 2025 and will affect EU exports to the US worth around 26 billion euros (5 percent of total EU goods exports to the US).

The EU responded by announcing that the countermeasures originally introduced against the US in 2018 and 2020, but then suspended, would be reinstated with effect from April 1, 2025. However, the EU postponed the date of reinstatement to mid-April.

These measures were taken in response to the steel and aluminum tariffs imposed by Donald Trump's first term, but were then suspended when the US agreed to suspend its measures against EU exporters within a certain quota.

The EU countermeasures result in the EU imposing additional tariffs on a range of US imports, including Harley-Davidson motorcycles, bourbon, orange juice, jeans, steel and aluminum.

The EU has also launched a two-week consultation to identify additional US products to be subject to new EU tariffs. It is expected that these new tariffs will be introduced by mid-April.

The proposed affected products include a combination of industrial and agricultural products (steel and aluminum products, textiles, leather goods, household appliances, tools, plastics, wood products, poultry, beef, certain seafood, nuts, eggs, dairy products, sugar and vegetables).

Building on this, the new US Executive Order of April 2, 2025 significantly expands these measures by introducing a general minimum tariff of 10 percent on all imports, regardless of product category and country of shipment. This represents a significant tightening of the previous tariffs, as a wider range of products are now affected.

For countries that have a particularly high trade surplus with the United States, an individual, increased tariff rate will be introduced as of April 9. The specific list of affected countries and the corresponding tariffs are set out in Annex I of the Executive Order. The additional duty for all exports from the EU to the USA is therefore 20 percent.

The new Executive Order provides for exemptions for goods shipped before April 5, 2025. In addition, a "US content rule" will be introduced, which states that duties will only be levied on the non-US portion of a product if at least 20% of the value of the product originates from the USA. This so-called "US content rule" is intended to ensure that multinational supply chains with a substantial proportion of US components receive preferential treatment.

The above measures should be seen separately from the tariffs recently imposed by the US on Canada, Mexico and China, which led to these countries announcing countermeasures.

In addition, on March 26, 2025, President Trump issued a new executive order announcing a 25 percent tariff on U.S. imports of motor vehicles and motor vehicle parts.

Beginning April 3, 2025, the 25 percent tariff will apply to vehicles imported into the U.S. and is expected to be extended to vehicle components (such as engines, powertrains, electrical components) on May 3, 2025.

With respect to the recently announced 25 percent tariffs on motor vehicles and motor vehicle parts and steel and aluminum products, no changes to the tariffs were made by the most recent order. However, specific exemptions and adjustments have been introduced aimed at mitigating the impact on certain product categories. In particular, the introduction of the "US content rule" offers companies whose products contain a significant proportion of US components the opportunity to apply the tariffs only to the non-US content of origin.

In addition to this, steel and aluminum products, which are already subject to Section 232 tariffs, and motor vehicles and parts, which have been subject to a 25 percent tariff since April 3, have been exempted from the additional tariffs. Other exemptions include pharmaceuticals, semiconductors, energy products and critical minerals used in humanitarian aid. A detailed list of these exemptions can be found in Annex II of the above-mentioned Executive Order.

The weighted average tariff rate in the EU and the USA is around 1 percent. While most goods are subject to a 0 percent tariff, there are significant tariffs in certain categories.

Examples of average tariff rates applied by the EU and the US are:

• Motor vehicles: 10 percent in the EU, 2.5 percent in the U.S.
• Dairy products: 30 percent in the EU, 17 percent in the USA
• Petroleum products: 2.5 percent in the EU, 6.5 percent in the USA

It is important to note that these are only broad examples and the exact specification of a product is required to determine the applicable duty rate. The EU and the US have free trade agreements with many countries around the world (e.g. the EU with the UK, Canada, Japan and South Korea; the US with Mexico and Canada). However, no such agreement exists between the EU and the USA.

Therefore, importers to the EU cannot claim preferential tariffs (typically 0 percent) on US products, just as importers to the US cannot claim preferential tariffs on EU products.

No. The place of origin of the goods determines whether additional duties apply. These duties are levied on goods of EU origin in the USA and on goods of US origin in the EU. However, with the Executive Order of April 2, 2025, a minimum import duty of 10 percent on all imports into the US was imposed on a majority of goods, so that reciprocal duties on goods from other countries of origin must also be taken into account.

The determination of "origin" can be complex. However, the rule of thumb is that origin determines where the goods were last substantially processed or worked. The origin should be checked carefully as various factors can influence the analysis.

The situation is dynamic and changes almost daily. However, a pattern is emerging: the US announces measures, suspends some, but at the same time threatens more.

The US has recently declared a national emergency based on large and persistent annual trade deficits in goods that are considered a threat to national security and the economy. President Donald J. Trump announced tougher measures to address these imbalances on April 2, 2025. These include the introduction of an additional 10 percent tariff on all imports, which will come into force from April 5, 2025. For countries with a particularly high trade surplus with the US, an individual, higher tariff rate will be introduced from April 9, as set out in Annex I of the Executive Order and thus the US has implemented the introduction of reciprocal tariffs (Reciprocal Tariffs). There is also speculation that pharmaceuticals could be subject to increased scrutiny and fall under Section 232 - the law used to assess national security risks on imports and the basis for the increased US tariffs on steel, aluminum, motor vehicles and motor vehicle parts.

German companies should be aware that the tariff dispute could also have an impact on supply chains outside of EU/US trade. As the US imposes new tariffs on goods imported into the US from other countries around the world, manufacturers from these countries will be looking for new markets to sell their goods.

The risk is that foreign manufacturers will focus on the EU market, which in turn could prompt the EU to introduce measures to protect EU manufacturers. As a result, companies that currently pay no or only low customs duties on the import of goods from third countries into the EU could find that these duties also increase as a result of potential EU protection measures.

With a team of over 800 customs advisors, KPMG helps companies to overcome the uncertainties created by the new US tariffs and EU countermeasures by:

• Analysing trade/customs data to gain supply chain visibility, risks and opportunities.
• Using our customs tools to model the impact of the new tariff measures on companies.
• Quantify customs scenarios and costs under different "what-if" conditions.
• Identify opportunities to utilise bonded warehouses, inward processing, free trade zones and drawback to achieve savings.
• Review tariff classification and origin to avoid or minimise potential duty increases.
• Review valuation methods to reduce customs valuation bases.
• Continuously monitor developments to stay informed of the current situation.

Contact Mario Urso from our Trade & Customs team to discuss how these tariffs could affect your business. We look forward to hearing from you.