German Export Giants Find Momentum Amid Trade Tensions: Why Now is the Time to Buy

The German economy, long the linchpin of European manufacturing, is showing unexpected resilience as trade tensions ease and business sentiment surges. Recent data from the Ifo Institute and ZEW Economic Sentiment Survey reveal a turning tide for export-driven sectors, with automakers, industrials, and logistics firms leading the charge. While risks remain—particularly U.S. tariffs and weak domestic demand—the confluence of improving trade forecasts, fiscal stimulus hopes, and pent-up demand suggests this is a critical moment to overweight German export-exposed equities.

The Ifo Expectations Jump: A Green Light for Manufacturers

The Ifo Business Climate Index’s expectations component surged to 88.9 in May, a 1.5-point leap from April and far above market forecasts of 88.0. This marks a pivotal shift for German industry, as companies like Daimler (DAI), Siemens (SIE), and ThyssenKrupp (TKA)—heavily reliant on global trade—see brighter horizons.

The manufacturing sector led the rebound, with the food industry reporting a strong upturn in sentiment, while construction notched its fourth straight monthly improvement. Even trade-heavy sectors like automotive and machinery saw expectations rise, fueled by reduced uncertainty around tariffs and anticipation of ECB rate cuts. Meanwhile, the service sector’s recovery—particularly in transport and logistics—hints at smoother cross-border flows.

Crucially, the Ifo data underscores that order intake has stabilized, a key sign for export firms. Yet the current assessment component dipped to 86.1, reflecting lingering pain points like weaker demand and supply chain bottlenecks. This divergence suggests investors should focus on companies with exposure to rebounding trade volumes and government infrastructure spending—not short-term operational challenges.

ZEW’s Optimism: A Vote of Confidence in Fiscal Stimulus

The ZEW Economic Sentiment Survey amplified the positive narrative, with its indicator soaring to 25.2 in May—a 39.2-point jump from April’s two-year low. Investors now see a clearer path forward thanks to progress on U.S.-Europe trade talks and the formation of a new German government, which has pledged €20 billion in green infrastructure spending.

The automotive sector (e.g., Volkswagen (VOW)) and chemicals (e.g., BASF (BAS)) are prime beneficiaries, as export orders rebound. Even construction firms like Hochtief (HCO) could gain from fiscal stimulus, though they must navigate rising operational costs—seen in Fraport’s (FRA) recent earnings miss.

Sector-Specific Catalysts: Autos, Industrials, and Logistics Lead

1. Automotive: A 10% rise in auto exports in Q2 2025 (projected) and improved U.S.-EU trade talks are tailwinds for Daimler and BMW (BMW).
2. Industrial Goods: Siemens’ rail and energy divisions, along with ThyssenKrupp’s engineering arm, stand to gain from infrastructure projects and reduced inflationary pressures.
3. Logistics: Fraport’s dip aside, transport firms like DB1 (Deutsche Bahn) benefit from normalized trade flows and e-commerce growth.

Risks to Monitor: Tariffs and Domestic Demand

The 40% of companies still citing order shortages—due to front-loaded purchases ahead of tariffs—highlight persistent uncertainty. Meanwhile, domestic demand remains weak, with ZEW’s current assessment at -82.0. A full recovery hinges on resolving U.S. trade disputes and avoiding a second round of rate hikes.

Tactical Overweight: Buy German Exports—Now

The data paints a clear picture: near-term resilience is here, driven by improving trade sentiment and fiscal tailwinds. While risks linger, the Ifo and ZEW surveys signal that export-driven stocks like Daimler, Siemens, and ThyssenKrupp are positioned to outperform.

Investors should prioritize selective exposure to companies with:
- Exposure to infrastructure projects,
- Diversified supply chains, and
- Pricing power to offset inflation.

Avoid pure-play domestic plays until domestic demand stabilizes.

Conclusion: The Export Rally is Just Beginning

Germany’s export machine is firing on all cylinders again. With trade tensions easing, business expectations soaring, and fiscal support on the horizon, now is the time to overweight German industrials and automakers. While U.S. tariffs and weak demand are speed bumps, the path ahead is clear. Act now—or risk missing the rebound.