Photo used for representational purposes. An overview shows employees gather as they attend a rally of the metalworkers' union IG Metall in front of German car maker Volkswagen (VW) headquarters, during a warning strike at the company's main factory in Wolfsburg, northern Germany, on December 9, 2024. Photo by Martin Meissner / POOL / AFP.
Frankfurt: Germany's influential machine-tool makers' federation warned Tuesday of a turbulent 2025 due to political instability at home, Donald Trump's "disruptive" return to the White House and growing Chinese competition.
The VDMA trade group, which represents some 3,600 companies in Europe's biggest economy, said it expects production across the industry to fall two percent next year after an eight-percent decline this year.
A key worry is political uncertainty in Germany, which is heading for elections in February, seven months earlier than scheduled, after the collapse of Chancellor Olaf Scholz's coalition government.
"Domestically, it is still unclear how economic policy can provide more support until a new federal government is formed," said VDMA president Bertram Kawlath, adding he hoped a new administration would be in place by the summer.
German elections are typically followed by a long period of coalition-building before a new government emerges.
Speaking at a press conference, Kawlath urged the new government to implement a "clear and reliable economic policy that places trust in companies, and gives them space and flexibility to successfully compete internationally".
The United States is the most important single market for Germany's factory outfitters, and Kawlath warned that Trump's second stint as president "will almost certainly be more disruptive" than his first.
Many companies fear the impact if Trump sticks to his pledge to impose sweeping tariffs on all goods imported to the United States, he said.
"However, we believe that the US market still offers opportunities for us," he said, adding that most VDMA members quizzed in a recent survey wanted to expand in the world's number one economy.
"The United States wants to reindustrialise and for this it needs European equipment and machines," he said.
Meanwhile the situation in China, traditionally a key export destination for Germany's machine-tool makers, was difficult, Kawlath said.
Local companies were increasingly emerging as rivals to German firms while a protracted slowdown in the world's number two economy had hit demand, he said.
"It is clear that the competitive situation with Chinese companies will continue to intensify," Kawlath warned.
The woes of the machine-tool makers reflect a weak picture for Germany's broader economy, which is on course for a second straight year of contraction in 2024 as it battles a manufacturing slowdown and weak demand for exports.
