German companies cut US investment to three-year low, data show

• First-half 2026 investments of €4.3 billion represent roughly one-quarter of the pre-pandemic average of €15.8 billion for the same period (2015-2019)
• While companies already operating in the U.S. continue reinvesting profits locally, suggesting the market remains attractive overall, new equity capital commitments have remained below average
• The downward trend accelerated following Donald Trump's return to office in January 2025 and his threatened tariffs, despite efforts like the EU's $600 billion investment pledge to avoid heavy duties

Summary: German Investment in US Plummets Amid Trade Policy Uncertainty

German companies drastically reduced direct investments in the United States during the first half of 2026, reaching a three-year low of €4.3 billion ($5 billion), according to data from the German Economic Institute (IW). This represents a nearly two-thirds decline year-over-year and an 80% drop compared to the same period in 2024.

Key Drivers:

The sharp decline continues a downward trend that began with Donald Trump's second presidential term in January 2025. Trump's threats to impose import tariffs on international trading partners have created significant uncertainty for transatlantic business relations. In response, the European Union negotiated an agreement last year that included a $600 billion investment pledge to avoid heavy export duties.

Historical Context:

Pre-pandemic (2015-2019), German first-half investments in the US averaged €15.8 billion—nearly four times the 2026 level. The 2020-2023 period saw exceptional circumstances due to COVID-19, including years with net investment outflows.

Investment Composition:

Analysis of 2025 investment flows revealed that while direct-investment loans and reinvested earnings remained exceptionally high, equity capital—the balance of new investments versus liquidations—stayed below average. This indicates existing German companies in the US continue reinvesting profits domestically, suggesting the market remains fundamentally attractive.

Market Implications:

Despite ongoing profitability and reinvestment by established operations, companies show clear hesitation to commit new capital amid policy uncertainty. This cautious approach reflects broader concerns about the stability of transatlantic trade relations and could signal reduced German economic engagement with the US market going forward.