Effective immediately, the United States has doubled tariffs on steel and aluminum imports to 50%, a drastic measure introduced by the Biden administration that has sparked alarm among German manufacturers, particularly those in the steel processing sector.

The German Steel and Metal Processing Association (WSM) expressed deep concern, highlighting the significant impact on small and medium-sized enterprises, which make up the majority of the approximately 5,000 businesses in this industry in Germany.

These firms employ nearly 500,000 workers, averaging around 100 employees each.

WSM's chief executive, Christian Vietmeyer, noted that U.S. producers may seek suppliers outside Germany who are not affected by these tariffs.

This could lead to a loss of business for German suppliers, as the costs associated with additional tariffs could threaten their financial stability.

Vietmeyer emphasized the unsustainability of such high tariffs, stating, "No one has the margins to absorb these bedrock tariffs."

German manufacturers are suppliers of essential components such as stamped and bent parts and springs, which are critical in various applications, including vehicle production.

The recent tariff increase threatens to further diminish the already fragile competitiveness of these companies, which are contending with existing economic challenges.

As companies face potential loss of business or increased costs, the urgency for action on the part of German and EU policymakers has escalated.

The European Commission is in ongoing negotiations with the United States regarding a new trade agreement.

The recent tariff hike during these discussions has been described by Commissioner Maroš Šefčovič as "deeply regrettable," suggesting it undermines the progress being made towards a negotiated solution.

Despite this setback, Šefčovič remains optimistic about the direction of the negotiations, while the EU has outlined potential retaliatory measures.

Currently, the EU has refrained from imposing countermeasures following the initial announcement of broad import tariffs in April, which included a 90-day pause to facilitate negotiations.

However, as this timeframe approaches expiration, experts have recommended a reassessment of the EU's strategy in light of the U.S. actions.

Samina Sultan, an international trade expert at the Institute of German Economy, urged the EU to adopt a more robust approach to its counter-strategy, careful to balance this with an aversion to escalating trade tensions.

Concerns extend beyond the immediate impact of the tariffs.

The U.S. is the world's largest importer of steel, relying on millions of tons annually as domestic production fails to meet demand.

About a quarter of the steel and half of the aluminum used in the U.S. is sourced from abroad, primarily from Canada, Brazil, Mexico, South Korea, and Vietnam for steel, while aluminum is chiefly imported from Canada, the United Arab Emirates, and China.

Industry analysts indicated that ultimately consumers in the U.S. will bear the burden of the increased tariffs as prices for products rise due to higher import costs.

This may further exacerbate inflationary pressures in the U.S. economy.

Additionally, domestic U.S. producers are expected to raise their prices in light of diminished competition from imports.

German firms engaged in exports to the U.S. sent approximately one million tons of steel in 2024, with an additional three million tons exported from other EU countries.

This signifies that exports to the U.S. represent around 18% of the total EU export market, corresponding to about one-twentieth of the U.S. raw steel production capability, which stands at approximately 81.4 million tons.

Despite limited exposure to the U.S. market, there is heightened anxiety among German steel producers regarding possible " diversion effects," whereby steel previously designated for the U.S. might instead flood the European market, thereby increasing import pressure.

Currently, one-third of processed steel in the EU is sourced from non-EU countries.

Gunnar Groebler, president of the Steel Industry Association and CEO of Salzgitter, called for the EU to strengthen protective measures against low-priced imports, commonly referred to as safeguards, to counteract these pressures.

The steel industry in Germany is facing severe challenges, marked by a 12% decline in raw steel production from January to April 2024, amounting to nearly 11.5 million tons.

Major market players, including Thyssenkrupp, are undergoing significant restructuring in response to these economic strains, while Salzgitter has recently intensified its cost-cutting measures.

The Association describes the current economic situation as "crisis-like," escalating concerns over the impact of U.S. tariffs.

The steel sector is concurrently navigating the transition towards greener manufacturing processes, necessitating investments in environmentally friendly technologies such as direct reduction facilities and electric furnaces powered ideally by green hydrogen.