Swissmem boss sees no recovery in Germany in the near future
Published: Monday, Nov 18th 2024, 12:00
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Swiss industry is keeping a watchful eye on developments in the two most important export markets, Germany and the USA. In an interview with AWP, the head of the umbrella organization Swissmem, Martin Hirzel, is even more cautious about Germany than the USA.
For the tech industry, which includes companies in the metal, electrical and mechanical engineering sector (MEM) and other technology companies, Germany is even more important with an export share of over 23% than the USA with a share of just under 15%. However, Germany's economy has been languishing in a mild recession since 2023.
Recently, the Swiss tech industry has not made any headway: sales fell in the first half of the year and fewer orders came in, not least because of Germany.
The figures published this morning by the Federal Statistical Office on the development of production in the secondary sector showed an increase in production in the third quarter overall and also for industry. Within the quarter, however, there was a downward trend from month to month.
Hirzel: "Germany has a structural problem"
Martin Hirzel also remains cautious about Germany's near future. When asked how high hopes are that the situation there will brighten up again with a new government, he told AWP: "In our view, the German economy has a structural problem. That is why we do not expect a rapid recovery."
In the best-case scenario, however, the new elections in Germany could improve the general mood and thus also increase the willingness to invest again, he added. If a new government quickly improves the economic policy framework with decisive reforms, things could also pick up again in the medium term.
It is well known that the automotive industry, which is relatively important for local machine manufacturers and other automotive suppliers, is doing particularly badly in Germany. "Demand for products from Swiss automotive suppliers will probably continue to fall," says Hirzel.
However, the uncertainty in Germany has led to a generally poor investment climate, which Hirzel calls a "real "investment brake". Accordingly, demand for capital-intensive investment goods from Switzerland, such as machinery, equipment or large systems, is currently weak.
However, the President of Swissmem does not only see the dark side. In the past, Swiss companies have always shown themselves to be agile and adaptable and have often served different markets. If the German automotive market were to collapse, they would have to focus their expertise on other business areas. And they will be able to do so in the medium term.
How consistently does Trump implement "tariff walls"?
As far as the upcoming change in the US administration under the leadership of Republican Donald Trump is concerned, Hirzel is reasonably relaxed. The decisive factor for the framework conditions for the Swiss export industry is the foreign trade policy of the USA. The two presidential candidates have not differed in principle in this respect. The big question now is how consistently the new president will implement his campaign announcements - in particular the raising of "tariff walls".
Hirzel did not want to make any major distinctions between individual sectors or types of company with regard to the prospects in the US. "Massively increased tariffs, as demanded by Donald Trump during the election campaign, would harm all companies that export to the USA. Export volumes would almost certainly fall."
However, companies in the Swiss tech industry are often global market leaders in their niches, with no equivalent competitors in the US. And other non-American competitors face the same trade barriers.
In general, he is confident about the prospects for the USA. "The USA is the largest economy in the world. The Swiss tech industry's export volume to America has increased significantly in recent years. If the US economy is doing well, companies in the Swiss tech industry will also benefit - provided the US doesn't close itself off completely."
Hirzel also emphasizes as a positive point that Donald Trump is "more open to technology" than Democrat Kamala Harris. This could promote growth in the USA.
Potential in Asia, especially in India
China is of course also a major export market for Switzerland. Exports there grew in the first nine months of the current year, but only thanks to a solid first half of the year. In the third quarter, however, exports declined. "China will remain an important market for the Swiss tech industry in the future," says Hirzel.
At the same time, he emphasizes the increasing role of India as a sales market. No other major market has shown comparable growth momentum in the past three years. Between 2020 and 2023 alone, the cumulative export volume increased by 60 percent. According to Hirzel, the free trade agreement with India could further boost this positive development. "It is therefore important that it is ratified as quickly as possible."
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