German Companies' US Investment Shock: Trump Era and Trade Tensions Take Their Toll

German firms' direct investments into the United States plunged by 66% in H1 2026, sinking to €4.3 billion ($5 billion).

The Second Trump Term as the Catalyst for Capital Retreat

IW analyst Samina Sultan notes that “the second Trump term beginning in January 2025 has been the primary driver of this decline,” underscoring how political uncertainty erodes investor confidence.

Trade Frictions Ripple Through Investment Flows

■The EU‑US trade pact includes a $600 billion investment commitment designed to stave off steep tariffs.

■The US has threatened import duties on many trading partners, prompting German investors to adopt a cautious stance.

Investment Dynamics: Pre‑Pandemic vs. Post‑Pandemic

■Prior to COVID‑19 (2018‑2022), German outbound investment to the US averaged €15.8 billion annually.

■The €4.3 billion recorded in H1 2026 represents roughly 73% less than that average – nearly a four‑fold reduction.

■The 2020‑2023 window saw “extraordinary conditions,” with net outflows in certain years.

2025 Investment Flow Characteristics

■Direct investment credits and reinvested earnings surged to historically high levels.

■While firms continue existing US operations, they remain cautious about committing fresh capital.

Expert Note (Rüzgar Ersoy): The downturn reflects not only political uncertainty but also deepening US‑EU trade tensions. German companies acknowledge the US market’s attractiveness yet demand a more stable policy environment for new capital deployment. If tariffs and protectionist measures are clarified, investment flows could rebound; otherwise, the German‑US investment corridor may settle at a new low point.