German companies cut direct investment in the United States to €4.3 billion during the first half of 2026, taking the flow to its lowest level since 2023 as businesses became more cautious about committing new capital.
Calculations by the German Economic Institute, IW, based on Bundesbank data, put the first-half total almost two-thirds below the equivalent period in 2025 and nearly 80% below the first six months of 2024.
The difference is larger when set against the years before the pandemic. German companies invested an average of €15.8 billion in the United States during the first half of each year in the five years before Covid-19, almost four times the 2026 total.
IW’s analysis does not, however, describe a straightforward corporate retreat from the American market. Its examination of investment flows during 2025 found unusually strong direct-investment loans and reinvested earnings, while equity capital — the balance between new investment and liquidations — remained below average.
Existing German operations are therefore behaving differently from companies considering new commitments. Businesses already generating profits in the US continue to reinvest substantial amounts locally, while decisions that require fresh equity for factories, acquisitions, or other expansion appear to face a higher hurdle.
That split is important for industrial investment because a manufacturer with an established American plant has already absorbed many of the costs involved in entering the market. Buildings, suppliers, staff, customer relationships, and regulatory systems are in place, making incremental reinvestment less exposed than a greenfield factory whose economics must be calculated over several years.
New projects face a less predictable trade environment. The second Trump administration has repeatedly used tariffs and the threat of further duties during negotiations with trading partners, making import costs and market-access conditions another variable in capital planning.
German manufacturers are particularly exposed because many of the country’s largest industrial sectors operate through cross-border production networks. Vehicles, machinery, chemicals, electrical equipment, and specialised components can cross borders several times before becoming finished products, leaving factories sensitive to duties imposed both on final goods and on inputs.
Locating production inside the US can reduce some tariff exposure, but it does not automatically remove it. A plant may still import specialised equipment, materials, or components from Europe, while changes in duties on those inputs can alter the economics of a project after the original investment decision has been made.
The United States and European Union attempted to establish greater predictability through their 2025 trade framework. The agreement included an expectation that European companies would invest an additional $600 billion across strategic US sectors through 2028, alongside commitments covering tariffs, market access, standards, and other barriers.
That aggregate figure was never equivalent to a centrally controlled European investment budget. Individual manufacturers, banks, energy groups, technology companies, and other businesses still decide whether specific American projects provide an acceptable return, and the first-half German data show that those decisions can diverge sharply from the political headline.
For Germany, the fall comes while manufacturers are already allocating large amounts of capital to electrification, automation, energy efficiency, software, and changes in global supply networks. Automotive companies in particular are funding new vehicle architectures and electric drivetrains while facing intense competition in China and slower demand in parts of Europe.
Preserving cash or delaying a greenfield project can therefore be rational even when management expects the US market to remain commercially important. Capital committed to a new American plant is capital unavailable for a European retooling programme, Asian production expansion, or acquisition elsewhere.
The continued strength of reinvested earnings also suggests that manufacturers are not simply concluding that the US is unattractive. Established operations can still provide good returns, particularly where local production offers proximity to customers and reduces exposure to imported finished-goods tariffs.
The constraint appears more closely tied to uncertainty around the next investment than dissatisfaction with every existing one. That distinction will shape how quickly flows recover if trading conditions stabilise: projects that have already been engineered but postponed can restart more quickly than investment programmes abandoned altogether.
The comparison with pre-pandemic levels should also be handled carefully. IW notes that the period from 2020 to 2023 included exceptional investment movements associated with the pandemic, including years of net outflows, so the current figures sit inside a volatile sequence rather than a smooth decline.
Even with that qualification, €4.3 billion is far below the historical first-half average and indicates that German boards are being selective about new US commitments. Political agreements can set expectations for investment over several years; factories still have to pass company investment committees one project at a time.
