Germany Has a Long History of U.S.
Investment. That May Be Changing
German companies invest more than three times
as much in the United States as American companies do in Germany, but they are starting
to rethink that strategy.
·
Thousands
of German companies already have factories in the United States, accounting for
12 percent of the country’s foreign investments.
·
$564
billion) the government plans to borrow to invest in infrastructure over the
next 12 years.
·
The
mid-1990s, when BMW and Mercedes-Benz set up plants in the South. Roughly a
decade later, Volkswagen followed.
·
Dozens
of smaller German companies produce goods in the United States, contributing to
Germany’s overall direct investment there, worth $657.8 billion in 2023.
· The ease of market access and a desire to produce locally.
President
Trump has defended his decision to introduce tariffs on goods from other countries
by arguing that it will lead companies to shift production to the United States,
bringing back jobs.
For
German companies, which have been producing their goods in the United States since
the late 1800s, such arguments ring hollow. Thousands of
German companies already have factories in the United States, accounting for 12
percent of the country’s foreign investments.
Automakers
like BMW and Mercedes-Benz have long had plants in the United States. In 2023, the
candy maker Haribo opened its first U.S. plant in Wisconsin, after decades of importing
its gummy bears.
Many
German companies are now calling that strategy into question. Recent surveys indicate
that German manufacturers are pulling back from investing in the United States,
and those that already have a footprint there are more gloomy
about their futures.
The
German Chamber of Commerce and Industry regularly polls the 6,000 German companies
with U.S. factories to gauge their outlook on the economy. For years, those companies
held an “above average” view, said Volker Treier, the head of foreign trade at the
chamber. But since Mr. Trump announced the initial round of tariffs on April 2,
sentiment has dropped.
“They
have fallen against the trend,” Mr. Treier said. “Because tariffs are poison.”
Instead,
it appears that many German firms are keeping their investments at home. Only 19
percent of companies in Germany said they were looking to invest in North America,
down from 25 percent, according to a separate survey of 216 German financial executives
by the consulting firm Deloitte.
German
companies also appear to be more willing to invest at home, since a new government
under Friedrich Merz was sworn in last Tuesday with a mandate to reduce bureaucracy
and bring down energy prices. Many are also hoping to cash in on the 500 billion
euros (about $564 billion) the government plans to borrow
to invest in infrastructure over the next 12 years.
That
excitement could change in the weeks before the 90-day suspension of tariffs ends
in July, or if the European Union and Washington are able to reach a trade agreement.
In
their first call since Mr. Merz took office, the chancellor and Mr. Trump “agreed
to resolve the trade disputes quickly,” Mr. Merz’s office said.
Among
the German industries hardest hit by the tariffs was the automotive sector, which
has had a significant presence in the United States since the mid-1990s, when BMW and Mercedes-Benz set up plants in
the South. Roughly a decade later, Volkswagen followed.
Leaders
of the three companies have held talks in Washington, hoping to ease the tariffs.
Both Mercedes and Volkswagen, which owns Audi, have said they were considering moving
the production of some models to the United States, which the White House celebrated
this month as proof that the president’s strategy was working.
Beyond
the leading automakers, dozens of smaller German companies
produce goods in the United States, contributing to Germany’s overall direct investment
there, worth $657.8 billion in 2023. That was more than three times as much
as the $193.1 billion that flowed into Germany from American companies in the same
year.
That
discrepancy is certain to feature in tariff negotiations involving Mr. Merz and
Mr. Trump, who has zeroed in on the trade deficit, in which Germany sells more goods
to the United States than it buys.
“We
have invested more, our companies have created more jobs in the U.S. than American
companies in Germany,” Mr. Treier said. “That to me is the most important starting
point for when we talk about fairness.”
For
German companies, the reason to set up production in the United States has been
driven by factors like the ease of market access and a desire
to produce locally.