Unsettling Times Ahead for German Firms in the U.S.A.
US businesses with German origins face challenges under Trump's trade policies
In the heart of Europe, German businesses feeling the brunt of Donald Trump's trade policies stateside are looking to the future with a heavy heart. A recent survey by the German Chamber of Industry and Commerce (DIHK) shows that only 14% of these companies anticipate economic growth in the next year – a dramatic drop from the 38% figure recorded before Trump took office in January 2021.
The unsettling, zigzagging policies of the U.S. government are the primary concerns for these companies, according to DIHK's head of foreign trade, Volker Treier. "This unpredictability makes it difficult for investments, unsettles even long-standing companies and creates uncertainty."
Trade tensions between the U.S. and Germany have been escalating since last year, with numerous announcements of new tariffs piling up in Washington, targeting sectors such as steel, aluminum, cars, and eventually broader EU imports. Although some measures have been temporarily suspended, the main issue remains the lack of reliability and consistency in the U.S. trade policy.
The insecurity is not just affecting the investment climate, with only 24% of German companies in the U.S. currently planning to expand their investments, compared to 37% only a year ago. On the opposite side, 29% now say they plan to reduce their investments, more than double the 18% from the previous year.
"Trump's U.S. trade policy is supposed to attract industry and jobs back to the country," Treier remarks, "but it's doing quite the opposite – it's driving away capital and trust." This uncertainty is creating a slippery slope for these German firms as they hesitate to invest in the U.S. and consider alternative markets instead.
German companies are warning of significant risks to their businesses, with 70% citing economic policy framework conditions as one of the greatest risk factors – a sharp increase from 46% in the previous year. Trade barriers are gaining importance, with 71% reporting disadvantages due to preferential treatment for domestic providers – a remarkable jump from just 21% last year. Additionally, 41% now report disrupted supply chains, compared to just 16% in the previous year.
The automotive sector, which includes major brands like Audi, BMW, Mercedes Benz, Porsche, and Volkswagen, is particularly vulnerable, facing a 25% tariff on autos and parts, significantly increasing the cost of German-made vehicles in the American market. This pressure forces German companies to reconsider their production sites or bear the added costs, affecting their competitiveness and profitability.
Trump's goal of decreasing the U.S. trade deficit with Germany, which exported $160 billion worth of goods to the U.S. in the previous year, compared to U.S. exports of $75 billion to Germany, could lead to further tariff measures, potentially impacting German companies' ability to export goods to the U.S. and maintain their market share.
In light of these challenges, Chancellor Friedrich Merz's upcoming trip to Washington, where he will meet with Trump, is viewed as a critical opportunity to address the concerns of German companies operating in the U.S.A. The outcome of their discussions could have far-reaching implications for the transatlantic trading relationship and the future of these multinational corporations.
- The unsettling, zigzagging trade policies implemented by the U.S. government, particularly those initiated by Donald Trump, are a significant concern for German businesses operating in the United States, as they make investments difficult and create uncertainty.
- The financial health of these multinational corporations is closely linked to the political landscape, with economic policy framework conditions, trade barriers, and disrupted supply chains cited as major risk factors by German companies in the U.S., especially those in the automotive sector.
