German Firms Slash US Investments Amid Rising Trade Uncertainty

2026-01-20 global

Berlin, Tuesday, 20 January 2026.
German corporate investment in the US plummeted 45 percent to €10.2 billion in 2025, as unpredictable tariffs under the new administration force companies to halt major capital decisions.

A Crisis of Confidence

The sharp decline in capital commitment reveals a profound hesitation among German executives to navigate the current U.S. economic landscape. According to a report released yesterday by the German Economic Institute (IW), German companies invested only €10.2 billion in the United States between February and November 2025 [1][8]. This represents a significant deviation not only from the previous year’s €19 billion but also from the long-term trend; the investment volume fell well below the ten-year average of €13.4 billion recorded between 2015 and 2024 [2][8]. When compared to this historical baseline, the 2025 figures represent a decline of -23.881 percent, confirming that the current contraction exceeds normal market volatility.

Uncertainty as the New Normal

The pullback is largely attributed to the erosion of planning security following the start of President Trump’s second term on January 20, 2025 [1][2]. Samina Sultan, a researcher at the IW, notes that when fundamental economic assumptions are questioned “practically overnight,” companies are unlikely to make far-reaching financial decisions [1]. This sentiment is echoed by the broader “wait-and-see” approach adopted by firms facing an unpredictable tariff regime, which has included a 15 percent levy on most EU goods since August 2025 [2]. Consequently, the U.S. market, once a reliable engine for growth, is increasingly viewed by German economists as a “risk business” [3].

The Tariff Toll on Trade

Beyond direct investment, the flow of goods across the Atlantic has faced severe headwinds. In the first eleven months of 2025, German exports to the U.S. fell by 9.4 percent to €135.8 billion [3]. The automotive sector, a cornerstone of the German economy, has been particularly battered, with exports of vehicles and parts dropping 17.5 percent to €26.9 billion [3]. Other key industries also suffered, with machinery exports slipping nearly 10 percent and chemical products falling by more than 10 percent during the February to October window [1][8]. These declines correlate with a historically high average effective U.S. import tariff rate of 14.4 percent, which has raised input costs and kept U.S. inflation above the 2 percent target [8].

Strategic Shifts and Relocations

Faced with these trade barriers, some companies are altering their operational footprints to bypass tariffs entirely. For instance, Lindt & Sprüngli is considering a $10 million investment to produce gold-wrapped Easter bunnies in New Hampshire to avoid the 15 percent import duty on chocolate products [4]. Similarly, Mercedes is shifting production of its GLC SUV model to U.S. facilities, a move that comes as the automaker reported a 12 percent drop in deliveries to U.S. dealers in 2025 [4]. While the automotive industry is currently exempt from the steeper 50 percent tariffs on steel and aluminum, the 15 percent tariff on other imports remains a significant burden that manufacturers have struggled to pass on to consumers [4].

A Geopolitical Realignment

The cooling of transatlantic relations has accelerated a shift in global trade dynamics, allowing China to reclaim its position as Germany’s most important trading partner. In 2025, the total trade volume with China reached €230.8 billion, surpassing the €222.8 billion recorded with the United States [3]. This realignment highlights the broader economic consequences of the administration’s protectionist policies. As the U.S. trade surplus with Germany shrank by nearly a quarter to €48.9 billion [3], the data suggests that the “America First” approach may be decoupling the U.S. from its traditional European economic allies, leaving both sides to pay the price for reduced cooperation [4][8].

Sources

Trade Policy Foreign Investment