Siemens Energy's Tariff Resilience: A Limited Hit, But Risks Lurk Ahead

Siemens Energy (SIEGY), the global powerhouse in energy infrastructure, has positioned itself as a survivor amid escalating U.S. import tariffs. While the company acknowledges tariffs will trim profits in 2025—by up to €100 million—the broader narrative is one of strategic mitigation and operational strength. However, the path ahead is fraught with supply chain hurdles, regulatory uncertainty, and a shifting hydrogen market that could test its resilience.

The Financial Buffer: Tariffs, Price Hikes, and a Bulging Backlog

Siemens Energy’s guidance for fiscal 2025 reflects a calculated response to tariffs. The company expects a “limited direct impact” of up to €100 million on profits, a fraction of its projected €1 billion net income. This optimism stems from two pillars:

1. Pass-Through Pricing: Siemens has raised prices for new U.S. orders, offsetting tariff costs for customers. This strategy is feasible due to robust demand for its turbines, grid equipment, and hydrogen technologies.
2. Order Backlog Insurance: With a record €133 billion backlog (as of Q2 2025), Siemens can lean on existing contracts to shield profitability. Over 90% of 2025 sales are already booked, providing a cushion against near-term volatility.

Supply Chain Sabotage? Not Yet, But Challenges Remain

While tariffs haven’t crippled Siemens, they’ve exposed vulnerabilities:
- European Electrolyser Exposure: The U.S. tariffs on EU goods—up to 145% on certain imports—threaten Siemens’ proton exchange membrane (PEM) electrolysers, a cornerstone of its green hydrogen business. These tariffs could add 20% to the cost of European-made components for U.S. projects.
- Steel and Aluminum Costs: A 25% duty on imported steel and aluminum raises production expenses for wind turbines and gas turbine blades. Siemens mitigates this with $500 million in U.S. manufacturing investments through 2025, aiming to localize 80% of critical parts.

Yet, progress is uneven. Siemens’ Gamesa wind division—a chronic underperformer—faces a €1.3 billion loss in 2025 due to defective turbines, a problem unrelated to tariffs but a reminder of operational risks.

The Green Hydrogen Crossroads

Siemens’ PEM electrolyser technology dominates 2 GW of U.S. green hydrogen capacity, but tariffs are tilting the market toward cheaper alternatives:
- Blue Hydrogen Surge: 64% of U.S. low-carbon hydrogen projects favor fossil fuel-based blue hydrogen, aided by Trump-era policies favoring natural gas. This shift reduces demand for Siemens’ renewable-powered solutions.
- Solar/Wind Cost Inflation: Tariffs on Chinese solar cells and steel are inflating the cost of co-located renewables, a key input for green hydrogen. Projects once deemed viable may now stall without subsidies.

Analysts at GlobalData warn that delayed feasibility studies and abandoned projects could erase 30% of Siemens’ U.S. order growth pipeline.

Policy and Profitability: A Delicate Balance

The outlook hinges on U.S. trade policy. While Siemens’ localized investments and price hikes offer short-term relief, long-term success requires tariff rollbacks or clarity on green hydrogen incentives. The Inflation Reduction Act (IRA) has been slow to fund projects, and the Biden administration’s stance on trade remains uncertain.

Meanwhile, competitors like Plug Power (PLUG) and Thyssenkrupp (TKA.GR) are capitalizing on domestic manufacturing advantages. Siemens’ European rivals, however, face retaliatory tariffs in U.S. markets, creating a fragmented global landscape.

Conclusion: A Resilient Engine, But Not Immune

Siemens Energy’s 2025 outlook is a tale of two forces: a robust order backlog and pricing power offsetting tariffs, versus structural headwinds in renewables and hydrogen. The company’s revised guidance—€1 billion net income and €4 billion free cash flow—appears achievable, but investors should monitor two key metrics:
1. Backlog Conversion: Will Q4 2025 bookings match the €14.4 billion record set in Q2?
2. Hydrogen Profitability: Can Siemens navigate tariff-driven cost inflation while blue hydrogen gains traction?

For now, the stock (SIEGY) trades at 14x forward earnings, a discount to peers like Vestas (VWDRY) at 20x. The tariff challenge is manageable in the short term, but the longer game hinges on clean energy policy and supply chain agility. Investors should buy Siemens Energy for its backlog strength—but keep an eye on the green hydrogen storm clouds.