World

German firms face geopolitical and regulatory risks

Dec 20, 2024 Germany

A recent survey by German trade associations highlights geopolitical conflicts as the main supply chain threat, while compliance with new regulations adds costs and bureaucratic hurdles

German companies are grappling with global trade challenges. A recent survey highlighted geopolitical conflicts as the primary concern for supply chains.

The survey conducted by four trade associations revealed that 82% of businesses identified geopolitical tensions as their main threat, surpassing cybercrime and natural disasters.

Geopolitical Uncertainty

Uncertainty over post-election US trade policies, particularly fears of renewed protectionism and unilateral import tariffs, has fueled apprehension. Only 6% of respondents anticipate improved multilateral trade relations.

Trade Partners

China remains a key trade partner, with 75% of respondents describing it as “important” or “very important” to their business operations. However, calls within the European Union for stronger measures against subsidised Chinese exports have grown, reflecting concerns over unfair competition.

Beyond China, other Asian markets and the US are also considered important trade partners, though they rank lower in importance than the Chinese market.

Bureaucracies

German businesses face additional hurdles from regulatory changes, such as the Supply Chain Due Diligence Act, which, since its introduction in 2023, has created compliance burdens.

Around 62% of surveyed companies reported negative impacts of the Supply Chain Act on their operations, citing excessive bureaucracy and heightened competition risks. Furthermore, the upcoming Corporate Sustainability Due Diligence Directive is expected to increase costs and red tape across the European Union.

Digital Tools

Many businesses are adopting digital tools to enhance supply chain transparency and resilience amid these pressures. 18% of companies have already implemented digital monitoring systems, with an additional 40% in various stages of adoption or planning.

Finding a Balance

Trade associations are calling on the German government and the European Union to balance regulatory compliance with maintaining local competitiveness. In a joint statement, they emphasised the need for pragmatic policies that promote resilient and diversified supply chains while reducing bureaucratic obstacles.

Image Credits: Mark König on Unsplash

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