German companies sharply reduced their investments in the United States during the first half of 2026, bringing capital flows to their lowest level in three years and signaling growing caution among European businesses confronting uncertainty over U.S. trade policy.
According to calculations by the German Economic Institute (IW), based on data from Germany’s central bank, direct investment by German companies in the United States fell to €4.3 billion, or about $5 billion, during the first six months of 2026. That represents a decline of nearly two-thirds compared with the same period in 2025 and almost 80% compared with the first half of 2024.
The decline is particularly striking when compared with investment patterns before the COVID-19 pandemic. During the five years preceding the pandemic, German companies invested an average of €15.8 billion in the United States during the first half of each year—almost four times the amount recorded in 2026.
Researchers at IW say the latest numbers extend a downward trend that has become increasingly visible since President Donald Trump returned to the White House in January 2025. German investment had already fallen sharply during Trump’s first year back in office. From February through November 2025, German companies invested about €10.2 billion in the United States, roughly 45% less than during the comparable period a year earlier.
A major source of concern has been the administration’s tariff policy. Trump has repeatedly used the threat or implementation of higher import duties as leverage in negotiations with major U.S. trading partners. Although the strategy is partly designed to encourage foreign companies to manufacture more products inside the United States, uncertainty surrounding tariffs can complicate the long-term calculations required for major corporate investments.
The European Union attempted to reduce those tensions through a trade agreement that included a commitment to approximately $600 billion in investment. Nevertheless, the latest German figures indicate that companies remain hesitant about committing substantial amounts of new capital to American operations.
Importantly, the decline does not mean German corporations are abandoning the United States. IW’s analysis of investment flows during 2025 found unusually high levels of reinvested earnings and direct-investment loans. Companies already operating in America continued putting profits generated by their U.S. businesses back into those operations. This suggests that executives still consider the United States an attractive and important market.
The weakness is instead concentrated in new equity investment. German companies appear increasingly reluctant to make fresh, long-term commitments while the future direction of American trade policy remains uncertain. This distinction is significant because new capital investments can translate into factories, facilities, equipment and expanded operations that contribute to economic growth and employment.
The trend also creates an apparent contradiction for the Trump administration. Tariffs are intended partly to encourage foreign manufacturers to relocate production to the United States to avoid import duties. Yet if companies perceive trade rules as unpredictable, those same policies can make executives more cautious about committing billions of dollars to projects that may take years or decades to generate returns.
German companies therefore appear to be pursuing a more defensive strategy: maintaining and reinvesting in established U.S. businesses while becoming more selective about major new commitments.
The 2026 figures do not necessarily indicate a permanent retreat from the American market. But they provide a significant measure of how policy uncertainty can influence international investment decisions. For Washington, the challenge will be demonstrating that efforts to attract more foreign manufacturing can coexist with the stability and predictability multinational companies typically seek before making long-term investments.
