Trump and the EU - impact on trade and the economy
Donald Trump's protectionist policies have led to higher tariffs and trade tensions in the past. These trade barriers are intended to protect domestic companies from foreign players. With his return to office and the associated revival of the economic credo ‘America First’, trade relations between the USA and Germany are expected to intensify. Specifically, import tariffs of 10% to 20% are planned (source: KPMG Germany). This means a considerable burden for German exporters, particularly in the pharmaceutical and mechanical engineering sectors. According to the news portal MDR, around a tenth of German exports went to the USA in 2023. There is therefore a threat of drastic measures for the European economy.
Recommendations for CFOs:
- Scenario analyses to assess potential sales losses
- Develop alternative sales markets outside the USA
- Adapt financial planning to exchange rate fluctuations, as the US dollar could come under pressure due to fiscal policy decisions
Impact on climate policy
Trump's well-known preference for fossil fuels could have a negative impact on global climate policy. Investments in sustainable technologies are jeopardised due to the threat of weaker international cooperation and reduced funding. This will affect the competitiveness of German companies that are heavily focussed on ESG and green technologies. Almost a third of German industrial companies are therefore expecting higher energy costs (source: Business Insider).
Recommendations for CFOs:
- Early adjustment of investment strategies
- Identify potential savings to offset higher production costs
- Diversification of financing models for green projects
The impact of Trump's policy on geopolitics and security
A deterioration in relations between the US and China is to be expected. Trump may make trade relations between the US and Europe dependent on the EU following his lead against China's production and export strength. This would pose considerable challenges for German companies with global supply chains. Both China and the USA are important, indispensable markets for German companies (Quelle: KMPG Germany). In addition, rising NATO expenditure could burden the public budget and indirectly influence corporate taxes.
Recommendations for CFOs:
- Diversification of supply chains
- Establish regional procurement networks
- Preparation for possible additional tax burdens
Deregulation agenda: impact on technology and digitalisation
Trump's deregulation agenda in the US may lead to American technology companies becoming more competitive, which poses new challenges for German companies. Particularly in the areas of digitalisation and artificial intelligence, there is a shift in the focus of innovation towards the USA, which is significantly increasing the pressure on German companies to catch up technologically. Trump's policies may not only change the dynamics between the global economic powers, but also influence the strategic orientation of many German companies, which will have to reassess their dependence on the USA and its technological lead (source: Heise Online).
Recommendations for CFOs:
- Targeted management of investments in digital transformation and innovation
- Regularly review the IT infrastructure for compliance risks
- Develop strategic partnerships with technology providers
The USA as the crypto capital of the world
The development of cryptocurrencies and digital assets is heavily dependent on US policy. Trump's declared goal of making the USA the ‘crypto capital of the world’ could trigger a boom in this area in the USA. German CFOs must increasingly incorporate the opportunities and risks of cryptocurrencies into their treasury strategies in order to remain competitive.
Recommendations for CFOs:
- Building expertise on cryptocurrencies and digital assets
- Integration of cryptocurrencies as a possible means of payment or investment instrument
- Analyse regulatory risks and opportunities in relation to digital assets
Conclusion: strategic planning is more important than ever!
The Trump policy presents German CFOs with new challenges, from trade tensions to technological and geopolitical risks. However, through strategic preparation, scenario analyses and targeted investments, companies can not only minimise risks but also take advantage of new opportunities.
