VDMA calls for economic reforms in response to US tariffs

Frankfurt, Germany – German machinery manufacturing sector association VDMA has called for social security and tax reforms to help mitigate the impact of US trade tariffs on the industry.

In a 25 Aug statement, VDMA executive director Thilo Brodtmann said such "painful" measures were necessary to relieve the burden on manufacturing companies and their employees.

According to Brodtmann, social security contributions have risen to more than '42% of wage' in Germany, with health insurance costs set to increase in 2026, and pension contributions rising to 20% by 2028.

A corporate tax cut approved for 2028 "will thus become a zero-sum game,” said Brodtmann, noting that the reduction "won’t help [employers] if contributions rise at the same time.”

Reform proposals include: abolishing the 'retirement at 63' system, higher deductions for early retirees, gradually raising the standard retirement age, shortening unemployment benefit, and higher co-payments for health insurance.

“The federal government now needs the courage and determination to implement these reforms,” stressed Brodtmann.

The VDMA chief also criticised federal plans to reduce bureaucracy, saying they risk turning into the opposite.

“Projects such as the ‘federal collective bargaining act’ are going in completely the wrong direction,” he said.

Meanwhile, implementation of the EU 'pay transparency directive' "threatens to become a Supply Chain Act 2.0 for small and medium-sized enterprises,” he added.

According to the VDMA, the mechanical and plant engineering sector remains a key driver of German industry, employing more than 1 million people.

The increasing pressures imposed by US tariffs, therefore, make "it all the more important that we can rely on competitive conditions in Germany,” Brodtmann concluded.