German engineering manufacturers face sharp order decline amid global trade crisis
Germany’s mechanical engineering sector recorded a steep 19 percent year-on-year drop in new orders in September 2025, reflecting ongoing strain from the global trade crisis and weakening industrial demand, according to the German Engineering Federation (VDMA).
The decline also contributed to a slight contraction in total orders for the first nine months of the year.
Base effects mask deeper structural weakness
VDMA chief economist Dr. Johannes Gernandt said that part of the year-on-year decline stemmed from base effects, as September 2024 had benefited from large-scale plant orders that did not recur this year. “That should not obscure the fact that the machinery and equipment manufacturing industry continues to experience a noticeable slump in demand and underutilization,” Gernandt warned.
He stressed that a sustainable recovery depends on resolving global trade disputes, including US punitive tariffs, and on structural reforms in Germany and Europe to reduce cost burdens and stimulate investment.
The federation reaffirmed its forecast of a five percent contraction in real production for 2025.
Foreign demand collapses, euro zone more resilient
The September 2025 figures show a five percent drop in domestic orders and a 24 percent drop in foreign orders. Orders from euro zone countries fell by 13 percent, while those from non-euro zone countries decreased by 27 percent.
In the third quarter of 2025, overall orders were six percent lower than a year earlier, with domestic orders down by three percent and foreign orders down by seven percent, while orders from euro zone countries and non-euro zone countries fell by two percent and by nine percent, respectively, all on year-on-year basis.
In the January-September period of this year, total orders edged down by one percent compared with the same period last year, while euro zone orders increased by 10 percent and non-euro zone demand fell five percent, both on year-on-year basis.
VDMA calls on Commission to secure relief from US Tariffs on Steel and Aluminum
The European Commission defends the 15 percent “tariff deal” with the U.S. as a “decision for stability and predictability.” However, an ever-growing list of critical machinery products has been left vulnerable to the much higher tariffs on steel and aluminum derivatives. This now threatens the existence of many European machinery companies. The VDMA urges the European Commission to work toward a solution.
The European Commission sees its tariff agreement with the U.S. as an act of “stability and predictability.” In an editorial article for the German daily newspaper “Frankfurter Allgemeine Zeitung,” European Commission President Ursula von der Leyen writes: “The most important element of our agreement is that we have drawn a very clear line at 15 percent for most EU products, including passenger vehicles and medicines.” However, Ms. von der Leyen fails to mention two key points that cast the “tariff deal” in a different light. First, the U.S. has significantly expanded the list of products to which the much higher steel and aluminum tariffs apply. As a result, around 30 percent of US machinery imports from the EU are now subject to a 50 percent tariff on the metal content of the product. For many companies in the manufacturing sector, such as machinery and equipment manufacturing, this means that their entire U.S. business is at risk.
Secondly, the list of steel and aluminum tariffs is to be revised every four months and expanded unilaterally by the U.S. Department of Commerce. Instead of planning security, as announced by the Commission, uncertainty will continue to prevail in transatlantic trade because the “tariff deal” is not permanent. In addition, there is a considerable additional burden of bureaucracy because the steel and aluminum tariffs are determined in a complex procedure: Among other things, companies must provide declarations on the country of melt and pour (for steel) or smelt and cast (for aluminum) for every ounce of metal in the product, and proof of the price of the metal content. The typical medium-sized machinery and equipment manufacturing company is unable to obtain this data in detail.
The VDMA has therefore addressed President von der Leyen in an open letter. In it, VDMA President Bertram Kawlath writes: “We urge the Commission to make all available efforts to relieve the EU from tariffs on steel and aluminum derivatives, and to ensure that machinery and equipment are excluded from future sectoral tariffs.”
Around 150 new products have already been added to the list of steel derivatives that will be subject to a 50 percent tariff on the metal content of the product in the future. These include motors, pumps, industrial robots and agricultural and construction machinery. At the next review in four months, further products could be added, such as drones or wind turbines and their components. For the industry, this is an unacceptable outcome of a “tariff deal” that was supposed to bring stability.
Since the U.S. tariffs were first introduced, the VDMA has expressed cautious optimism that a permanent 15 percent tariff could at least provide planning security for companies. However, following the agreement that has now been reached, VDMA President Bertram Kawlath concludes that the new steel and aluminum tariffs have once again unsettled European industry. “The harm caused by them, along with the prospect of still more in the months to come, are sending key machinery sectors hurdling toward the precipice of an existential crisis,” he warns.
German industry body urges EU action, new trade pacts to counter China
Germany’s mechanical engineering industry association, VDMA, calls on EU to reduce dependence on the Chinese market and improve access to new markets, raising the alarm regarding the growing challenges posed by China’s industrial policies.
As China continues to leverage competition-distorting advantages and government subsidies, European companies find themselves at a crossroads, demanding immediate action from policymakers.
“Our companies are ready to take on the competition with Chinese companies. We want to be successful on the global market based on our own strength,” VDMA President Kawlath said. “We are doing our homework. But that is not enough. We are calling on politicians to strengthen the location and ensure fair competition on the domestic market now.”
VDMA President Bertram Kawlath articulated the urgency of the situation during a recent media conference, where the association unveiled its position paper titled “Leveling the Playing Field: A Call for Fair Competition with China.” The paper outlines the pressing need for a united European front to counteract the unfair practices that have been undermining the competitiveness of local industries.
“Chinese companies are not playing fair,” Kawlath stated. “They benefit from substantial government support and often disregard our technical regulations, which puts our businesses at a significant disadvantage.”
According to VDMA European companies are eager to compete on fair terms but require better support from their governments. This includes implementing countervailing duties on imports from countries that violate EU antidumping or anti-subsidy rules and enhancing market surveillance to penalize non-compliance with EU legislation.
To avoid dependencies on China, the development of strategically relevant technologies should be supported by industrial policy. This could be achieved through non-price-related criteria in public tenders, exclusion criteria for market access and local content criteria but also concluding free trade agreements: There is an urgent need for the EU to conclude more free trade agreements, particularly with MERCOSUR and India, to improve access to new markets and reduce dependence on the Chinese market.
“We need new free trade agreements, with India, for example. The agreement with the South American Mercosur states has long been completed.
Now it must finally come into force,” Bertran Kawlath, VDMA President said.
The association also urged to promote standardization activities by European companies to avoid competitive disadvantages as China uses standardization as an instrument to implement its economic policy interests and is striving for global dominance of Chinese standards, VDMA said.
Platts, part of S&P Global Commodity Insights, assessed domestic HRC in Northern Europe at Eur600/mt ex-works Ruhr, and imported HRC in Northern Europe at Eur520/mt CIF Antwerp, both stable day over day.
German engineering sentiment improves but remains shaky
The mood in Germany’s mechanical and plant engineering sector improved somewhat at the start of 2025 but remains very mixed, according to the latest survey by association VDMA conducted in late March.
Just over a quarter (27%) of the total of 940 companies now rate the current situation as very good or good, compared with 22% in January, Kallanish hears. By contrast, 30% rate the situation as poor or very poor. The outlook has also brightened somewhat: almost one in three companies expect the situation to improve in the next six months, versus only 22% in January.
However, “this may only be a snapshot”, cautions VDMA chief economist Ralph Wiechers. The survey was completed before 3 April, so the latest tariff announcements by the USA and the reaction of the countries affected are not yet reflected in the results.
As a positive factor, the drop in interest rates should also have a favourable impact on the industry. In addition, the industry will also be able to benefit from Germany’s €500 billion special fund for infrastructure investments – if bureaucracy and long approval procedures do not slow down the investment climate.
North America, as the most important overseas market, has lost ground. In January, 42% of companies rated sales opportunities in North America as good or very good. But, with a view to the next six months, North America received only 29% of responses in March.
Germany, on the other hand, was able to catch up considerably. Almost one third of companies expect a positive domestic business trend, versus only 13% in January.
