By Maria Martinez
BERLIN, March 24 (Reuters) – Even before the U.S.-Israeli war on Iran began, German companies had grown more pessimistic about their business overseas because of trade barriers and mounting geopolitical risks, the German Chamber of Industry and Commerce, or DIHK, said on Tuesday.
As the inflationary impact of the conflict, now in its fourth week, adds to the pressures, Volker Treier, DIHK head of foreign trade, said companies had no choice but to try to find new markets.
“Diversification is no longer a strategic option – it is a necessity,” Treier said. “Companies that broaden their markets become more resilient to political risks.”
Also on Tuesday, the Purchasing Managers Index showed Germany’s private sector growth slowed to its weakest pace in three months in March as services lost momentum and the Middle East conflict drove freight and energy costs higher.
BARRIERS HURT INTERNATIONAL OPERATIONS
The survey published on Tuesday was compiled between February 2 and 13.
Some 69% of firms the DIHK surveyed said trade barriers had damaged the profitability of their international operations, up 11 percentage points from a year earlier and the highest level since the organisation began collecting the data in 2005.
They were mostly pessimistic about the outlook, with 21% of companies expecting their business to deteriorate, compared with 16% anticipating an improvement.
Tariffs were felt most sharply in the U.S. market. 86% of German firms active there reported being affected, DIHK said. Expectations for the year ahead had fallen to a record low.
“The United States is becoming a risk factor,” Treier said. “High tariffs, political volatility and legal uncertainty are making long-term planning increasingly difficult.”
In addition, companies said they were also affected by non-tariff trade barriers.
Some 51% cited local certification requirements, 37% pointed to tighter safety standards and 35% flagged export controls.
Export controls particularly affect business with the U.S. and China. Within the European Union, companies pointed to reporting obligations, packaging rules and climate-related regulations.
“Our companies are under double pressure,” Treier said. “While new barriers are emerging around the world, we in Europe are tightening regulation even further. That further weakens our companies in international competition.”
As a result, many firms are seeking new markets. The planned EU-India agreement and the signed EU-Mercosur agreement are raising hopes for new momentum.
(Reporting by Maria Martinez; Editing by Hugh Lawson and Barbara Lewis)
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