Trump 2.0 Takes on Three German Sectors
Hamburg Port: Logistics hub for German foreign trade. Photo: Carsten Steger / Wikimedia Commons
5 Min. read
The White House formalised a 100 percent tariff on patented medicines in April, phased in from summer 2026 with 120 days for large pharma firms and 180 days for smaller providers. For the EU a separate agreement applies a 15 percent rate on pharma patents. At the same time steel and aluminium tariffs remain at 50 percent, and the average US tariff burden on German machinery is up to 26 percent according to a VDMA survey. Three sectors, three very different responses. Machinery, pharma and semiconductors each show distinct findings, no uniform “Trump effect.”
Key Takeaways
- Machinery currently bears the highest average burden. 26 percent VDMA average, many products fall under the 50‑percent tariff for steel and aluminium derivatives. Orders for January 2026 down 6 percent.
- Pharma faces 15 percent in the EU. Outside the bloc the rate is 100 percent. Bayer, Merck KGaA and Boehringer Ingelheim have joined the Trump‑drug‑pricing effort and signed MFN pricing agreements.
- Semiconductors are hit by the subsidy pull, not the tariff. Intel has permanently cancelled its Magdeburg project, originally a €30 billion investment and 3 000 planned jobs. Dresden remains an anchor for Infineon and the TSMC cluster.
- SME leverage for the next 60 days. Supply‑chain mapping with tariff exposure per item, volume hedging against tariff volatility, US‑light assembly as an options calculation instead of reflex delay.
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Political commentary on the second term is plentiful elsewhere. Here the operative mix matters: tariffs, sector exemptions, pricing agreements, location incentives. And the question of where it hits the margin of a German exporter.
Mechanical Engineering: 26 percent average tariff burden, steel and aluminium derivatives as the focal point
According to a recent VDMA survey, German mechanical engineering faces an average US tariff burden of 26 percent. That is surprisingly high because the media narrative puts the automotive sector in the spotlight. Cars benefit from the EU agreement’s flat 15‑percent rate for vehicles. Many mechanical‑engineering products, however, fall under the separate 50‑percent duties on steel and aluminium derivatives. Orders fell by 6 percent in January 2026, and the first‑half export figure for 2025 was down 3.4 percent.
The operational friction sits with the Mittelstand. The majority of VDMA members are small and medium‑sized enterprises that lack the personnel or capital to shift production globally. TRUMPF and other family‑run machine builders are weighing options such as price hikes, a US “assembly‑light” model, and partial substitution with non‑tariffed components. The VDMA has launched a series of lobbying trips to Washington, focusing on the steel and aluminium derivatives list, because that is where the industry‑political impact is most mis‑targeted.
Pharma: 15‑percent protection for the EU, MFN agreements for the big players
Trump’s announced 100‑percent tariff on patented pharmaceutical products includes a special provision: imports from the EU, Japan, Korea, Switzerland and Liechtenstein are subject to a flat 15‑percent tariff line. Generics, biosimilars and active ingredients remain exempt for at least one year. Bayer, Merck KGaA and Boehringer Ingelheim are therefore shielded from the harshest scenario, but they must either pass the 15‑percent surcharge onto US sales or offset it through volume negotiations.
Alongside the EU special line, the Trump Most‑Favoured‑Nation (MFN) model applies. It obliges participating pharma companies to offer US patients the lowest international price, in exchange for waiving the 100‑percent tariff. Industry reports say several large European and US firms have struck MFN price agreements with the administration. Big players with a global footprint can respond through price deals, US investments or existing negotiation channels, whereas specialised Mittelstand firms have fewer levers. That is where the gap emerges: smaller pharma companies have limited ability to offset tariff costs via location guarantees or direct agreements.
Semiconductors: Trump subsidies outweigh the pressure from Trump tariffs
In the semiconductor sector the Trump effect is asymmetrical. Intel has scrapped its Magdeburg project, originally a €30 billion investment with roughly 3 000 planned jobs. The cancellation is not a pure Trump effect; it combines three strands: a demand slump in the foundry business, corporate restructuring with tighter capital discipline, and a US‑home‑market location priority that offers higher subsidies. Intel’s role as a mandatory supplier to the US Department of Defense also plays a part. CEO Lip‑Bu Tan cited weak customer demand and capital discipline as the reasons. For German suppliers the outcome is the same, regardless of which factor dominates.
On the other hand, investments continue in Germany. The Infineon fab in Dresden is construction‑complete, and the TSMC fab on the same site is slated for a production start in 2027. The Mittelstand question in semiconductor supply therefore revolves less around tariff circumvention and more around linking into the clusters that remain in Germany. Suppliers tied to Magdeburg need an alternative anchor within 60 days, or the equipment and material pipeline for 2027 will be lost.
What will decide the next 60 days operationally
The 60‑day period is not a regulatory deadline but a planning window. Companies that only recalculate prices, delivery clauses, customs positions and US options in the autumn will fall into existing contract and budget cycles for 2027. Three actions are feasible within this timeframe.
Map the supply chain with concrete customs exposure per tariff line. A blanket 15 percent assumption overlooks the steel‑and‑aluminium derivative trap at 50 percent. A clean breakdown by HS‑code shows which product line actually loses margin and which can be replaced by non‑tariffed components.
Calculate the US‑site option honestly. Bayer is reviewing it, Merck KGaA has negotiated. Mid‑size firms must work out their own volume threshold for a light‑assembly solution in the USA instead of shifting it reflexively. An option analysis takes one to two weeks; a reflexive standstill costs market share.
Re‑align the semiconductor anchor. Suppliers with a Magdeburg link now need a connection to Dresden‑Infineon, Dresden‑TSMC or European alternative clusters such as ASML in Eindhoven. Without an anchor, pipeline security for equipment and material in 2027 is missing.
German exports to the USA fell by 9.4 percent to €135.8 billion from January to November 2025, according to Destatis data. This is the lowest trade surplus since the pandemic year 2021. China has returned as the most important trading partner. Spring 2026 will not decide every US deal, but it will determine which German mid‑size companies recalculate their customs, location and cluster options early enough.
Frequently Asked Questions
Which German sectors are most affected by Trump 2.0?
In spring 2026 the mechanical engineering sector carries the highest average burden at 26 percent VDMA average, driven by steel and aluminium derivative tariffs at 50 percent. Automotive benefits from the EU agreement’s 15‑percent flat rate, pharma enjoys a EU special rule of 15 percent instead of 100, and semiconductors are primarily affected by the US subsidy pull, not by tariffs.
What does the MFN price agreement mean for Bayer, Merck KGaA and Boehringer?
The Most‑Favoured‑Nation rule obliges participating pharmaceutical groups to offer US patients at least the lowest international price. In return the 100‑percent tariff is eliminated. Fifteen of the 17 large pharma companies have signed up, including Merck KGaA and Boehringer Ingelheim. Bayer is also evaluating the expansion of its own US production capacity.
Why did Intel abandon the Magdeburg project?
CEO Lip‑Bu Tan cites a lack of customer demand and higher subsidies in the US home market as the reason. Intel is also a mandatory supplier for the US Department of Defense, which raises the strategic priority of US sites. The original investment of 30 billion Euro and the 3 000 planned jobs are now lost for Magdeburg.
How should mid‑size mechanical engineering firms react in the next 60 days?
Check tariff exposure per tariff position instead of calculating a flat industry rate. Know the share of steel and aluminium derivatives in your product mix, as those carry the 50‑percent peaks. Run a US‑light assembly scenario as an option, even without an immediate relocation. Document VDMA lobbying vehicles and association feedback for Washington.
Which semiconductor options remain in Germany after the Magdeburg exit?
The Infineon fab in Dresden is structurally complete, and the TSMC fab on the same site follows the plan for a 2027 production start. Mid‑size suppliers with Magdeburg plans must secure a link to Dresden or an alternative European cluster within the next 60 days, otherwise equipment and material pipelines for 2027 will be lost.
Photo: Carsten Steger / Wikimedia Commons (CC BY‑SA 4.0)
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