German Businesses See Big Opportunities on US Soil

With demand cratering at home, the country’s top businesses are attracted to America’s growing economy and incentives.

Photo by Cesar Salazar via Unsplash

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Germany may no longer be the sick man of Europe, but it’s a little green around the gills these days. So companies there are hedging their bets by pumping record amounts of money into US ventures, the Financial Times reported.

Under the Weather

After recovering from its lengthy illness in the late 2000s, Germany — with its industrial prowess — became one of the most integral parts of the European economy for the next decade and a half. However, the post-covid global financial crisis and Russia’s invasion of Ukraine threw a wrench in all that progress, and the country’s economy is shrinking, with its GDP contracting by roughly 0.3% in 2023. 

Exports are down, consumer demand is weak, and the nation’s trade deficit with China is ballooning. Perhaps most problematic: It’s become more expensive to do business in Germany. Late last year, two out of every three German companies told a Deloitte survey that they relocated some of their operations abroad because of high energy costs. One of the most alluring markets is the US, where the economy is growing and both the Inflation Reduction Act and the CHIPS and Science Act offer attractive incentives: 

  • German companies announced 185 capital projects in the US last year — 40% of them in the manufacturing sector — totaling a record $15.7 billion in foreign direct investment, up from $8.2 billion in 2022, the FT reported. By comparison, German businesses pledged just $5.9 billion to projects in China in 2023. 
  • The most expensive investment was $2 billion from Volkswagen which will go toward a factory in South Carolina. BASF, the world’s largest chemical group, told the FT it plans to spend €3.7 billion ($4 billion) between 2023 and 2027 to expand its operations in North America.

Wake Up: Germany isn’t as bad off as it was in the 1990s, but at last month’s World Economic Forum, Finance Minister Christian Lindner said the nation is “tired” and needs a “strong cup of coffee.” He and other officials are encouraging a reduction in political bureaucracy to speed up the rollout of renewable energies and the immigration of skilled workers. He also said the EU shouldn’t try to “subsidize almost everything” like in the US, even though that’s a prime factor in winning German business. The country might need to add a double shot of espresso to that cup of coffee.