German investment in the US drops to three-year low in first half

German companies reduced their investments in the US in the first half of 2026 to their lowest level in three years.

According to Reuters, this resulted from firms limiting their exposure to Washington’s uncertain trade policies.

Calculations by the German Economic Institute (IW) show that direct investment in the first half dropped by roughly two-thirds year-on-year to 4.3 billion euros ($5 billion).

This marks the lowest level since 2023.

According to the report, which is based on Deutsche Bundesbank data, this figure represents a decline of approximately 80% compared with the same period in 2024.

“This is a continuation of the downward trend observed since the start of Donald Trump’s second term in January 2025,” IW researcher Samina Sultan told Reuters.

Since returning to office, Trump has threatened most of the US’s international trading partners with tariffs in an effort to extract concessions advantageous to Washington.

For instance, to avert steep tariffs on its exports to the US, the European Union signed an agreement last year that included an investment pledge of $600 billion.

Data show that during the five years preceding the COVID-19 pandemic, first-half investments by German companies in the US averaged 15.8 billion euros. That figure is nearly four times the 2026 level.

However, Sultan noted that the 2020–2023 period was shaped by the “extraordinary circumstances” of the pandemic, with net investment outflows recorded in certain years.

Researchers also examined the composition of investment flows throughout 2025 and found that both direct investment loans and reinvested earnings were exceptionally high, whereas equity capital in the narrower sense—the balance between new investments and liquidations—remained below average.

“Consequently, companies already operating in the US continue to reinvest the profits they generate there back into the country. This shows that the US remains an attractive market overall,” Sultan said.

On the other hand, Sultan added that companies are hesitant to commit fresh capital.

European governments are also growing increasingly cautious regarding American investments in the Old Continent.

According to an assessment by The Economist magazine, while US firms do not hold a large share of overall investment in Europe, they are concentrated in critical sectors.

Two-fifths of the business that American firms generate from foreign governments comes from the IT and defence sectors, where switching to new suppliers is costly and complex.

At an aggregate level, the magazine estimates that American companies account for a relatively small share of public spending abroad.

Of the $25 trillion in sales generated by listed American companies last year, roughly $500 billion (or 2%) came from foreign governments.

This corresponds to approximately 7% of public procurement across non-US OECD countries, which account for the vast majority of that spending.

Some countries are more dependent than others. In terms of the volume of government contracts won by American firms last year, figures from data provider TenderAlpha show that Australia (6% of contracts) and the UK (4%) are more reliant than France (2%) and Germany (1%).