The Trump administration attempts to attract companies to invest in the United States through tariffs and other measures, but German companies are not convinced.
According to a report by Reuters on August 16, the German Institute for Economic Research (IW) calculated based on data from the German Central Bank that in the first half of this year, German companies' direct investments in the United States plummeted by nearly two-thirds, reaching 4.3 billion euros, the lowest level since 2023. Compared to the same period in 2024, the decline was even closer to 80%.
IWR researcher Samiina Su'ltaen stated that this continued a trend of decline since the beginning of Donald Trump's second term in January 2025.
After returning to the White House, Trump used tariffs as a tool to pressure several trading partners, claiming that these measures were in the interests of the United States. Last year, in order to avoid higher tariffs on exports to the US, the European Union reached a trade agreement with the US, which included a commitment to invest $600 billion in the US.
However, from the actual actions of German companies, tariff pressures have not led to a new wave of investment in the US. Data shows that in the five years before the COVID-19 pandemic, German companies’ investments in the US for the first half of the year averaged 15.8 billion euros, which is nearly four times the level during the same period this year.
However, IW believes that this does not mean that German companies are completely withdrawing from the United States. Researchers analyzed the investment composition for 2025 and found that both direct investment loans and profit reinvestment were at high levels. However, equity capital—which better reflects the willingness to invest new capital—still remained below average.
Sultan said that companies that have entered the American market are still willing to reinvest the profits they earn there in the United States, indicating that the United States remains a attractive market overall.
But German companies are clearly more hesitant about investing new capital. Research by IW shows that, against the backdrop of the uncertainties brought about by Trump’s trade policies, companies are re-evaluating the balance between the attractiveness of the American market and the risks associated with new investments.
In contrast, German companies' investments in China have actually increased in recent years.
Similarly, based on IW's analysis of data from the German Federal Bank, German enterprises' direct investments in China will be around 7 billion euros by 2025, a substantial increase of over 50% compared to the approximately 4.5 billion euros in 2024, marking the highest level since 2021. Reuters reported in January this year that, amid increasing trade uncertainties due to U.S. tariffs, some German companies are seeing China as an important market for risk diversification, and are adopting a more "China-focused" production model.
