German Companies Cut U.S. Investment to Three-Year Low Amid Trade Uncertainty

German companies sharply reduced direct investment in the United States in the first half of 2026, with flows falling to €4.3 billion, the lowest first-half level since 2023. The total was down by nearly two-thirds from a year earlier and almost 80% below the comparable period in 2024, according to calculations by the German Economic Institute, known as IW, based on Deutsche Bundesbank data.

The pullback marks a clear change in the pace of new capital flowing from Germany into the U.S., but it does not amount to a wholesale retreat from the market. German companies already have a very large installed investment base in the United States, and other evidence suggests many existing operations are continuing to spend, reinvest profits and localize production even as executives become more cautious about fresh commitments.

The IW calculations, reported by Reuters, show how far the latest figure sits below earlier norms. In the five years before the COVID-19 pandemic, first-half German direct investment in the U.S. averaged €15.8 billion, almost four times the 2026 level. IW researcher Samina Sultan also cautioned that the 2020 to 2023 period was distorted by the pandemic, with some years recording net investment outflows.

New equity commitments are the weak point

The composition of investment matters because foreign direct investment can rise through several channels. According to Reuters, IW’s review of 2025 flows found that direct-investment loans and reinvested earnings were exceptionally high, while equity capital in the narrower sense, the balance of new investment and liquidations, remained below average.

That pattern points to a split between companies that are already established in the U.S. and decisions involving fresh capital. Existing subsidiaries can keep profits in the country, lend within corporate groups or continue previously planned spending without signaling the same willingness to launch new projects. Sultan said the continued reinvestment suggested the U.S. remained attractive overall, but companies were more hesitant to commit new capital.

The size of Germany’s existing U.S. footprint helps put the €4.3 billion first-half flow in perspective. Deutsche Bundesbank data show that German outward direct-investment stocks in the United States exceeded €460 billion at the end of 2024. The U.S. accounted for the large majority of the €560 billion that German companies had invested across the Americas on the Bundesbank’s consolidated measure. A weak six-month flow therefore signals slower expansion at the margin, not the disappearance of a long-built corporate presence.

Business surveys show caution, not abandonment

Survey evidence from the German Chamber of Commerce and Industry, or DIHK, points in the same mixed direction. In its spring 2026 review of German businesses active in the U.S., 43% described their current business situation as good and 46% were optimistic about their own business over the next 12 months. Forty-one percent said they intended to increase capital expenditure, up from 26% in the previous survey.

Those plans coexist with much weaker views of the broader environment. Only 24% expected the U.S. economy to improve, while 30% expected deterioration. Trade barriers were cited as a business risk by 56% of respondents, far above the worldwide reading in the same survey. The result is an unusual combination: firms with an established customer base may still see reasons to invest locally, but the policy backdrop makes longer-horizon decisions harder to price.

Companies are also adapting their operations to higher trade costs rather than simply leaving. DIHK found that 68% of German companies surveyed in the U.S. were raising prices in response to import costs, while about 40% were shifting supply chains toward local sources. Nearly one-third said they were pursuing a “local for local” approach by producing in the United States for the U.S. market. Only 8% planned to reduce their U.S. engagement, and none in that survey said they were considering a complete withdrawal.

That distinction helps explain why investment intentions and realized cross-border flows can move in different directions. A company may expand a factory from retained U.S. earnings, source more components domestically or postpone a new German-funded equity injection until tariff rules are clearer. Those choices can all reflect continued commitment to the U.S. market while reducing the amount of new capital recorded as a direct flow from Germany.

Tariff rules keep changing

The trade framework itself has shifted repeatedly since the start of President Donald Trump’s second term. The 2025 U.S.-EU framework established a 15% tariff structure for much EU merchandise, with exceptions and separate rules for some sectors. It also said European companies were expected to invest an additional $600 billion in strategic U.S. sectors. The European Commission later said that investment figure was based on private-company intentions rather than a government spending commitment.

Policy changes continued in 2026. A July 23 presidential memorandum published in the Federal Register directed a new Section 301 tariff framework covering dozens of trading partners. For European Union products covered by that action, goods with a most-favored-nation tariff below 10% were to receive a Section 301 tariff that brought the combined rate to 10%, while products already at or above 10% received no additional Section 301 tariff under that specific action. The memorandum also provided exemptions, and the Section 301 measure sits alongside other sector-specific tariff rules.

German business groups have focused less on any single tariff rate than on the frequency of change. DIHK said in July that repeated adjustments were creating additional bureaucracy and legal uncertainty, arguing that investments can be delayed when companies cannot rely on stable trade-policy rules. Its spring survey similarly found that customs procedures, proof-of-origin requirements and compliance work were adding to the administrative burden for German businesses operating in the United States.

Bundesbank research published in April offers a useful framework for interpreting that behavior without overstating the evidence. Its analysis of German foreign investment found no broad deglobalization in the historical data and noted that foreign direct investment is typically strategic and slow to adjust because projects carry large fixed costs. The researchers also pointed to the economic logic that, when uncertainty rises and an investment is difficult to reverse, waiting can become more valuable.

The first-half 2026 numbers are consistent with that kind of wait-and-see behavior, but they do not prove that trade policy alone caused the decline. What is clear is that the fall coincides with repeated tariff changes, that German business groups continue to rank trade barriers and predictability among their main concerns, and that existing German operations in the U.S. remain far more committed than the headline flow number alone might suggest.