German Investment in US Plummets Nearly 45% During Trump’s Term

German companies reduced their investments in the United States by nearly 45 percent during the first year of President Donald Trump‘s second term. According to a report published by the German Economic Institute (IW), this significant decline is attributed to rising trade uncertainties. Between February and November 2025, German firms invested approximately 10.2 billion euros (around $11.1 billion) in the US, a stark contrast to nearly 19 billion euros during the same period the previous year.

The IW’s analysis utilized data from the Bundesbank to highlight the trend, which represents a drop of more than 24 percent compared to the average investment of 13.4 billion euros from 2015 to 2024. The report emphasizes that the fluctuations in foreign direct investment can be significant, and this decline reflects a broader concern among German investors regarding the US economic landscape.

Trade Policy Uncertainty Influences Investment Decisions

In addition to reduced investments, German exports to the US also experienced a downturn. Between February and October 2025, shipments fell by 8.6 percent compared to the same timeframe the previous year. This marks the most substantial decrease since 2010, excluding the impact of the COVID-19 pandemic. The IW attributes this slowdown not solely to US tariffs but also to the depreciation of the dollar, which has affected international trade dynamics.

Frequent changes in US trade policy have unsettled businesses, leading to a more cautious approach. Samina Sultan, a researcher at the IW, noted that the unpredictability stemming from Trump’s trade policies has made companies hesitant to commit to long-term investments. She stated, “When the fundamental assumptions of the economic environment are called into question, sometimes almost overnight, very few companies are willing to make such far-reaching decisions.”

Sector-Specific Declines and Broader Economic Implications

The IW’s report also provided insights into sector-specific performance, revealing particularly sharp declines in automobile and auto parts exports, which fell by nearly 19 percent. Exports of machinery decreased by 10 percent, while shipments of chemical products saw a similar drop of over 10 percent. This downturn highlights the ripple effects of tariff policies, which have negatively impacted both sides of the Atlantic.

The report suggests these tariffs have increased input costs in the US, contributing to inflation rates remaining above 2 percent. Overall, the significant reduction in German investment and exports signals broader implications for transatlantic trade relations and raises questions about the future of economic cooperation between Germany and the United States. As firms navigate this uncertain landscape, their investment strategies may continue to be influenced by the evolving political and economic environment.