Industrial sector

How will the industrial sector respond to new US tariffs?

The newly imposed US tariffs are a major blow to the industrial competitiveness of Europe. Those who remain passive now risk losing ground. Those who act strategically, however, are laying the foundation for future success. In this article, we take a closer look at the impact of the trade conflict on European industrial organisations and explore potential countermeasures.

7 minutes to read
With insights from...
""

Mario Schmuziger

Regional Managing Director ICP EMEA & Member of the Regional Executive Team & Partner

The new US tariffs, rising geopolitical tensions, and increasing protectionism are posing serious challenges for companies around the world—particularly in the DACH region.

Germany, Austria, and Switzerland are export-driven economies with globally integrated value chains. Their success stems not from resisting globalisation, but from fully embracing it.

Now, the latest tariff measures imposed by the US cast a long shadow over these countries' economic outlook. Margins are shrinking, order volumes are declining, and investors are growing uneasy.

So, what exactly are the consequences of these developments and how can the industrial sector respond? These are the questions we’ll explore in this blog post.

New US Tariffs, old dependencies: a chaotic starting point

Framed as measures to protect national interests, the latest round of US tariffs targets a wide range of industrial goods, including steel, aluminium, vehicles, and machinery, particularly high-tech investment goods. For companies in the DACH region (Germany, Austria, and Switzerland), this has direct implications, particularly for those producing distinguishable physical goods such as equipment, machines, devices, vehicles, or high-tech components like drives, sensors, and pumps.

Germany remains by far the largest exporter of such goods. In 2023 alone, exports to the US exceeded €130 billion – nearly ten percent of the country’s total exports (source: Statista). Austria and Switzerland show similarly strong export dependencies, especially in mechanical engineering, electrical engineering, and medical technology. The new US tariffs of up to 31% now not only endanger key sales markets, but also threaten jobs, investment, and innovation capacity across European industrial organisations.

Different challenges for different sub-sectors

A closer analysis reveals significant differences in how various sub-sectors within industrial companies are impacted:

Equipment & machinery manufacturing

This sector forms the backbone of the DACH region’s industrial strength. The United States is a key market, particularly for specialised machinery, robotics, and industrial systems. These are often customised for individual clients, built in small batches, and based on decades of technical expertise. Local production in the US is not easily replicable. Thus, US tariffs do not merely impact sales—they undermine long-standing customer relationships and strategic investment decisions, calling predictability and trust into question. In the worst-case scenario, even the competitiveness of American industries, such as semiconductors, could be adversely affected.

High-Tech component suppliers

Companies in this segment face a dual threat, not only from US tariffs but also from rising competition in Asia, especially China. With US market access increasingly restricted, Asian suppliers are intensifying their efforts in Europe. Supported by higher production volumes and growing engineering capability – particularly in India and Malaysia – these new entrants increase price pressure on Swiss, German, and Austrian manufacturers. Differentiation through innovation, speed, and customer-specific adaptation is becoming a necessity.

Consumer goods industry

For an industry already under pressure, the challenges are intensifying – especially in export-oriented segments or those with transatlantic supply chains. Margin-sensitive product categories such as household goods or small electrical appliances are particularly vulnerable. Many companies must now reassess their go-to-market strategies, explore new international markets, and regionalise production capacities. Demand uncertainty is an additional burden, with consumers in both the US and Europe reacting sensitively to price changes. European consumer goods manufacturers must therefore prioritise production flexibility, targeted digitalisation, and regionalisation strategies.

Strategic measures: navigating the storm

While geopolitical shifts are outside corporate control, how businesses respond to them is not. But what practical steps can the industrial sector take? As with the challenges, the answers are multifaceted—but all require strategic rethinking. For DACH-based industrial organisations, the focus must shift from short-term damage control to long-term resilience and future viability.

The following structural levers highlight possible responses—both operationally and strategically:

  • 1. Diversification over concentration

    Many companies are actively reassessing their export markets. The focus is moving away from the US and towards regions such as Southeast Asia, Latin America, or the Middle East. Free trade agreements – like CETA (with Canada), the EU-South Korea agreement, or the EU’s new strategy for Africa – offer opportunities for market expansion. Switzerland is negotiating agreements with India and Thailand and has recently ratified one with Malaysia. Agreements with Mercosur countries are in effect or under negotiation, paving the way for greater market access for discrete manufacturing in emerging regions.

  • 2. Localising value creation

    ‘Local-for-local’ is becoming a strategic imperative. Companies looking to serve the US market must consider establishing production there. Many are currently evaluating whether to relocate assembly or even manufacturing lines to North America. This creates proximity to the customer—and avoids tariffs. However, it also means investing in a large but volatile economy, potentially at the expense of innovation efforts elsewhere. This is a fundamental question of investment priorities. 

  • 3. Rethinking supply chains

    Particularly in the DACH region and neighbouring areas, where many companies are deeply integrated into complex supply networks, supply chain redesign is underway. Sourcing outside tariff-affected regions, increasing inventory, and building regional redundancies are among the primary responses. Scarcity of goods is prompting companies to extend the lifecycle of machines and components – a move that also aligns with sustainability goals. Refurbishment, targeted recycling, and evergreen approaches are seen as promising foundations.

  • 4. Product adaptation as a strategic tool

    An often overlooked but effective tactic is targeted product adaptation. Companies are developing versions of products that fall under less tariff-intensive classifications, including subscription-based, leasing, or rental models. These changes require close collaboration with customs and trade compliance experts, but the potential cost savings are substantial. Many companies are also adopting modular manufacturing approaches, exporting only pre-assembled components. Final assembly then takes place in the destination country, significantly reducing the tariff-liable portion of the product. This not only enhances production flexibility but also fosters local value creation.

  • 5. Efficiency and innovation

    Higher costs due to tariffs can only be partially passed on to customers. The remainder must be absorbed through efficiency gains – via automation, lean management, value engineering, or digital transformation. At the same time, innovation and product differentiation are becoming increasingly important. Companies at the technological forefront are better positioned to withstand pricing pressure and trade barriers.

The key role of politics and economic ecosystems

Not all challenges – or perhaps very few – can be solved single-handedly. Politicians also have a crucial role to play. Industry associations in Germany (e.g. VDMA, ZVEI), Austria (VDMA, IV), and Switzerland (Swissmem) are calling for targeted support, such as export subsidies, tax breaks, or focused investment incentives. Promoting industry through additional free trade agreements is also on the political agenda of these associations. These measures appear to offer medium to long-term potential, as demonstrated by the export success of countries like Denmark and Switzerland.

At the same time, diplomatic channels must be reinforced. The European Commission – and Switzerland’s foreign policy representatives – must advocate in Washington for a fair and sustainable trade framework. The recently revived transatlantic economic dialogue could play a key role in de-escalating tensions.

In recent years, domestic protection measures such as subsidies or stimulus programmes have proven insufficient to counteract structural changes. A proactive and agile approach – closely aligned with market needs, customer requirements, and emerging technologies – has proven far more effective in strengthening resilience. Long-term customer relationships depend on trust, consistent excellence, and clear strategic differentiation. We believe companies that embody these values, many of which are found in the heart of Europe, will continue to succeed.

Looking beyond the political sphere, one key success factor in today’s environment is often overlooked – the strength of regional industrial ecosystems. Especially in times of crisis, the benefits of being embedded in a reliable network of suppliers, technology partners, research institutions, and local service providers become apparent. Industrial clusters – in mechanical engineering, medical technology, or electronics – offer not only innovation potential, but also operational resilience with shorter lead times, higher transparency, and faster adaptation to new market demands.

Companies should therefore not only reassess their global value chains, but also actively invest in strengthening regional partnerships and collaboration structures. In a fragmented global environment, this can provide a distinct strategic advantage.

Conclusion: challenge or accelerator?

The new US tariffs present a serious threat to European industrial sector. Yet, as with many unpredictable events, they also represent an opportunity. At Zühlke, we believe that companies which take decisive action now by reevaluating strategies and entering new markets will not only survive but emerge from the crisis stronger.

The industrial history of Germany, Austria, and Switzerland is built on entrepreneurship, adaptability, innovation, and a global outlook. These virtues are more essential today than ever – and they are the key to a successful future in a more fragmented and volatile world economy.

Mario Schmuziger Zühlke

My personal takeaway? Remain confident. Every crisis offers an opportunity for repositioning. Those who act wisely today can become tomorrow’s leaders – despite tariffs, barriers, and uncertainty.

Do you have questions or a different opinion? Feel free to get in touch – I look forward to the conversation.

Get in touch
Insights
Read further Insights