While large multinational corporations in industries like automotive and pharmaceuticals have made public commitments or floated expansion plans, many small- and medium-sized enterprises (SMEs) — particularly from export-heavy economies like Germany and Italy — are either delaying or reconsidering their U.S. strategies.
Uncertainty Undermines Confidence
Trump’s rapid-fire announcements of tariffs, walk-backs, exemptions, and reintroductions have made planning for the long term nearly impossible, especially for firms without deep financial cushions.
Take Italy’s EuroGroup Laminations, a key supplier of components for U.S. carmakers like Ford and General Motors. Although its production from Mexico currently avoids tariffs, CEO Marco Arduini says relocating production to the U.S. isn’t a clear-cut solution. Tariffs on specialized steel, high labor costs — up to six times those in Mexico — and limited material availability make the move economically unattractive.
Similarly, Germany’s ebm-papst, a maker of industrial fans and motors, has paused plans to expand its U.S. footprint, citing the growing threat of a tariff-induced recession.
“If there is an economic downturn in the U.S., demand may develop differently,” said CEO Klaus Geissdoerfer, reflecting a broader mood of caution.
SMEs More Vulnerable Than Corporate Giants
Smaller firms — the backbone of the German and Italian economies — are often more sensitive to trade policy shocks. Their relatively lean balance sheets mean they react faster to instability, often by pulling back rather than doubling down.
“Contrary to Donald Trump’s hopes, his protectionism will not lead to more German companies moving to the U.S. and creating jobs there,” said Marc Tenbieg, head of Germany’s SME association DMB. He confirmed that several of their member firms are reviewing or reconsidering U.S. operations due to tariff risks.
Even among those still committed to U.S. growth, there is wariness. German cable manufacturer LAPP is moving forward with its New Jersey expansion, but CEO Matthias Lapp emphasized that the decision stems from a long-term strategy, not short-term political shifts.
A Chilling Effect Across the Atlantic
Industry bodies are seeing similar hesitations ripple through their memberships. Germany’s VDMA, which represents engineering firms, reports that some members are delaying purchases and investments. “Industry appears to be pressing the pause button,” said Andrew Adair, the group’s trade policy advisor.
The uncertainty intensified after Trump, on April 2, imposed sweeping tariffs on imports from most trading partners, including a 20% tariff on EU goods. Following a market downturn, this was partially eased to 10% under what Trump called a “90-day pause.”
Trump’s combative rhetoric — that other countries have been “screwing” the U.S. — and fixation on trade deficits (such as the $235.6 billion gap with the EU) have added to political friction and economic risk, prompting some European leaders like French President Emmanuel Macron to call for investment freezes in the U.S.
What Lies Ahead?
Economists and consultancies warn of broader consequences. RBC Capital notes that 10% of U.S. consumption depends on imports, making substitution difficult. AlixPartners projects that U.S. household discretionary spending could drop by over 10%, potentially chilling demand even further for foreign-made goods.
Meanwhile, Europe is re-evaluating its priorities. Industry groups are urging firms to diversify exports towards India, Southeast Asia, and Latin America — regions seen as less volatile and potentially more rewarding in the long run.
“We have seen that the situation can change quickly overnight,” said Sebastian Zank of Scope Ratings. “Everyone will keep their feet still until a picture emerges that can be described as sustainable.”
Bottom Line
While Trump’s tariff policy aims to force investment back into the U.S., it may be having the opposite effect on Europe’s SMEs. Uncertainty, cost pressures, and geopolitical risk are prompting smaller firms to hit pause or walk away entirely, raising questions about the long-term impact of protectionism on America’s standing as a destination for foreign business.