With his “tariff hammer” announced a few days ago, US President Donald Trump has exceeded even the worst fears regarding his trade policy. Even though he has since backtracked somewhat, experts fear a global recession if the measures are implemented as announced. One thing is clear: German SMEs that sell their products all over the world will also suffer from the high tariffs. This is a good opportunity to further enhance your own competitiveness, says enomyc author Jan Ulrik Holsten. In part 2 of his “Trump 2.0” article, he explains what companies can do to optimally prepare themselves now.
In the current situation, strategies are needed that not only look good on paper, but above all work in practice. The focus must be on quick and pragmatic steps that lead to measurable improvements in liquidity, profitability, and resilience in the short to medium term.
The following seven measures are particularly effective in securing and further expanding the competitiveness and financial stability of German SMEs.
Measures that can be implemented in the short term
- Introduction of an early warning system for delivery and financial risks
A key element of crisis resilience for SMEs is the ability to identify risks at an early stage and take appropriate countermeasures. With a suitable early warning system, any bottlenecks in supply chains or credit lines can be identified immediately by continuously monitoring critical parameters such as delivery times, payment defaults, or capital commitment ratios. An effective lever for this is the introduction of AI-based software tools that analyze all transactions in real time and automatically raise alarms in the event of deviations.
- Optimization of working capital management
Securing liquidity is vital for medium-sized companies, especially in times of economic uncertainty. Appropriate initiatives can help to free up capital tied up in inventories, receivables, and liabilities, thereby optimizing liquidity. The integration of planning processes for sales and operations (purchasing, production, SCM), known as sales & operations planning (S&OP), has proven effective in reducing and managing these processes across the board. At the same time, receivables management should be streamlined, for example through stricter credit guidelines for new customers, increased use of factoring or credit insurance, and shorter payment terms. On the liabilities side, improved coordination with suppliers can help extend payment terms without jeopardizing delivery reliability.
- Hedging currency and interest rate risks
With growing economic uncertainty, the risk of currency fluctuations and rising interest rates is increasing. Companies with business activities in the US or significant USD exposure should reconsider their hedging strategy. In the short term, forward or option transactions are useful for hedging currency risks in order to minimize exchange rate fluctuations. In addition, credit lines with variable interest rates should be reviewed and, where possible, converted to long-term fixed interest rates. The introduction of a treasury management system allows for ongoing assessment of financial risks and ensures agile management of hedging options.
- Developing alternative sales markets outside the US
With the US taking increasingly protectionist measures, companies should take strategic steps to diversify their sales markets. Growth markets in Asia and Latin America, where demand for German machinery, technology products, and industrial components is high, are promising. A pragmatic approach is to search for new distribution partners or strategic customers in these markets. This can be accelerated by market entry analyses, the use of chambers of commerce, or the expansion of digital distribution platforms. Where possible, existing resources should be reallocated efficiently and the establishment of cost-intensive new distribution structures should be avoided. Online channels, virtual trade fairs, and strategic partnerships can also facilitate market entry.
Measures that can be implemented in the medium term
- Strategic adjustment of procurement and production locations
In view of possible US trade restrictions and stricter localization requirements, companies should also reassess their procurement and production strategy. Two scenarios are conceivable here: Nearshoring, i.e., relocating production to geographically closer regions (e.g., Eastern Europe) in order to reduce dependence on the US and respond more flexibly to market changes. Alternatively: onshoring in the US. If the US market remains indispensable, partial localization of production can help circumvent trade barriers. Joint ventures or partnerships with US companies are a good way to leverage existing infrastructure. Implementation requires a thorough location and cost analysis, and logistical and regulatory conditions must also be taken into account.
- Securing technology transfer and innovation capabilities
Because core technological competencies and innovations are the lifeblood of many SMEs, it is essential to maintain research and development collaborations or explore new avenues despite restrictive US regulations. One promising concept is the formation of “innovation hubs” in Europe or in geopolitically neutral regions, where cooperation with academic partners, start-ups, and other companies is coordinated. In practice, it is advisable to protect intellectual property in as many markets as possible in order to achieve legal certainty on the one hand and to be able to react more flexibly to the termination of individual collaborations on the other. When implementing this strategy, it is important not to withdraw prematurely from US collaborations, but to first evaluate alternative R&D partnerships in order to avoid losing expertise.
- Building strategic alliances and professional network management
When US companies are given an advantage through government subsidies or new regulations, German SMEs have little they can do on their own to counter this. Close networking with industry associations, industrial clusters, and political decision-makers is therefore advisable in order to bundle interests and enable joint lobbying at regional, national, and European level. Forming consortia that jointly invest in research and technology or negotiate procurement solutions has proven to be a practical approach. It is important to define clear goals and responsibilities in advance to prevent cooperation from fizzling out. Professional network management and a structured partner selection process that focuses not only on price and performance but also on cultural and strategic “fits” are important for successful implementation.
The measures mentioned above also provide their own added value independently of each other. Overall, they give medium-sized companies a robust structure that helps them remain capable of acting in the face of protectionist economic policies in the US—but also with regard to other geopolitical risks. An early warning system for supply and financial risks, a well-thought-out technology and innovation strategy, the intelligent adaptation of sales and production, tight working capital management, a globally diversified location policy, the pooling of resources in alliances and networks, and professionally structured crisis management are the interlocking building blocks that make German SMEs more resilient and competitive. Experience shows that companies that implement these building blocks consistently and with foresight not only secure their financial strength and profitability, but also gain market strength – and thus future viability.
The future of German SMEs?
Speed is crucial – as is the right partner
The examples described above show that decisive action, rapid response, and professional project management are crucial to how companies weather the current storm. It is now important to develop a clear sense of urgency and not be guided by false hope. The support of an experienced consultant is particularly helpful in such a situation. Together, you can analyze which measures will have the greatest effect. Because one thing is clear: the developments under Donald Trump 2.0 are threatening. But with the right tools and an experienced partner at their side, German SMEs can not only defend their position, but even expand it in the long term. How well is your company prepared for geopolitical risks? Trade barriers, supply bottlenecks, investment uncertainty – in times of increasing global instability, clear strategies are needed to secure your market position. In a non-binding initial consultation, our expert Jan Ulrik Holsten will show you what concrete measures medium-sized companies can take now to become more resilient – and to seize opportunities where others only see risks.
About the author
Jan Ulrik Holsten is a partner at enomyc, where he is responsible for sales and marketing. He is responsible for comprehensive turnaround and value enhancement projects as a consultant and interim manager. This article highlights a key solution approach and consulting portfolio that has proven to be a valuable lever for improving profitability and increasing competitiveness. Jan Ulrik Holsten also focuses on corporate profit improvement and working capital management. You can find out more about Jan Ulrik Holsten here.
