Strong Euro in 2025 Puts German Exporters Under Growing Pressure Amid Weak Global Demand

Summary:

The euro’s 12% appreciation against the U.S. dollar in 2025 is eroding the price competitiveness of German exports, particularly in price-sensitive markets....

Stronger Euro Becomes a Strategic Headwind for German Exporters

Germany’s export-oriented economy is facing renewed strain from an appreciating euro, with the currency gaining over 12% against the U.S. dollar in 2025 and rising significantly against other major currencies. This surge, while benefiting importers, has introduced serious challenges for exporters, especially in industries where price sensitivity and international competition are high.

Dirk Jandura, President of Germany’s Federation of Wholesale, Foreign Trade and Services (BGA), described the currency’s strength as a slow-moving but persistent erosion of exporters' margins. “In highly competitive markets,” he emphasized, “there’s very limited scope to pass on these currency-driven costs to end customers.”

This highlights a clear causal relationship: as the euro strengthens, the relative price of euro-denominated goods increases abroad, leading to reduced demand and thinning profit margins. Unlike abrupt shocks, the effects of a strong currency are gradual yet widespread depressing pricing power across Germany’s flagship sectors like machinery, automotive, and precision equipment.

Mid-Sized Firms at Greater Risk from Currency Volatility

While many large corporations utilize sophisticated hedging strategies to mitigate currency risk, the BGA warns that small- and medium-sized enterprises (SMEs) are more vulnerable. Most SMEs use only partial or short-term hedges if any leaving them exposed to prolonged euro strength.

In the short run, exporters can adjust pricing or streamline operations, but over time, sustained currency appreciation reduces competitiveness in global tenders and supply contracts. For German firms operating on thin margins in foreign markets, this reality presents a growing strategic risk.

Helena Melnikov, CEO of the German Chamber of Commerce and Industry (DIHK), echoed this sentiment, stating that exchange rate fluctuations have now become a critical business risk for at least one-third of Germany’s internationally active companies.

Limited Relief from Import Gains: A Mixed Net Effect

On the flip side, the stronger euro reduces import costs for raw materials, energy, and intermediate goods typically priced in dollars. This could lower production costs and help moderate inflationary pressures. “Cheaper imports are helpful,” said Jandura, “but their benefits are quickly offset by high energy prices, transportation costs, and tariffs.”

The net impact remains unfavorable for most exporters. While some relief is gained in input pricing, it does not fully compensate for the loss of international price competitiveness or the strategic uncertainty faced in planning and contracting.

Calls for Predictable Policy and Stable Framework Conditions

Amid this backdrop, business associations are urging the government to ensure predictable regulatory and fiscal environments. As Melnikov put it, “Only with stable and foreseeable conditions can firms plan effectively and manage foreign exchange risk in a competitive manner.” This need becomes especially urgent given that Germany’s exporters are also grappling with high U.S. tariffs and weaker demand from China.

According to Germany Trade & Invest (GTAI), Germany’s total exports in 2025 grew by just 0.6%, reaching approximately €1.6 trillion barely above 2022’s post-pandemic level. The subdued growth underscores how currency appreciation is amplifying existing trade headwinds, not just from exchange rates, but from broader geopolitical and structural trends.

Outlook for 2026: Clouds on the Horizon

Looking forward, the export forecast for 2026 remains bleak. Apart from the strong euro, German exporters face compounded risks from extended trade frictions with the U.S. and deteriorating demand conditions in China two of Germany’s most important non-EU markets.

The confluence of these factors suggests that unless the euro’s strength moderates or supportive policy interventions emerge, Germany’s export-driven model may face prolonged stagnation. Exporters must not only manage cost structures but also recalibrate their global strategies to maintain market share under less favorable currency and demand conditions.

Germany’s Export Engine Faces Structural Currency Stress

The euro’s sharp appreciation in 2025 has become a structural stressor for German exporters, threatening long-term profitability and global competitiveness. While importers gain some advantage, exporters particularly SMEs are navigating thinner margins, limited hedging flexibility, and heightened uncertainty.

Unless monetary normalization or policy support materializes, the euro’s strength may continue to undercut Germany’s trade surplus and industrial performance in 2026. The challenge ahead is not just tactical, but strategic: maintaining global relevance in a shifting macroeconomic landscape shaped by volatile exchange rates and fragmenting trade alliances.

Risk Warnings and Investment Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading with strategies. Following any strategies or investment methodologies is the potential for loss. The content on the site is being provided by our contributors and analysts for information purposes only. You alone are solely responsible for determining whether any trading assets, or securities, or strategy, or any other product is suitable for you based on your investment objectives and financial situation.

Quick Access to 7x24

Quick Access to More Editor-selected Real-time News