BERLIN: German companies are rapidly changing where they invest their money, increasing spending in China while sharply reducing investment in the United States as trade tensions, tariffs and policy uncertainty reshape global business strategies.
German firms invested about €5.6 billion ($6.50 billion) more in China during the first half of 2026 than they did during the same period a year earlier, marking an increase of roughly one-third, according to a study by the German Economic Institute (IW).
At the same time, German direct investment in the United States fell by nearly two-thirds to about €4.3 billion, highlighting a major shift in corporate spending between the world's two largest economic powers.
The change comes as U.S. trade policies under President Donald Trump have created greater uncertainty for companies operating in the American market. New tariffs and changing policies have made it harder for businesses to predict future costs and market conditions, weakening investor confidence. German companies, however, continue to see China as too important to ignore.
Juergen Matthes, an economist at the IW, said German businesses have limited options if they want to remain competitive in the global market. China is not only a major market for German products but also an important place for companies to develop and test new products while facing strong competition from Chinese businesses.
Lower production costs are another factor encouraging German firms to expand in China. Analysts say government support for businesses and a relatively weak Chinese currency can make manufacturing in the country more affordable, giving companies additional reasons to produce goods locally.
The growing investment gap is raising concerns in Germany and across Europe. Economists warn that continued expansion in China could gradually move more production, investment and jobs away from Europe. Some experts are urging the European Union to take stronger action to protect European businesses from what they consider unfair competition.
Possible measures include countervailing tariffs on Chinese goods to offset the advantages created by subsidies and other government support. The investment shift reflects a broader challenge for German companies' access to major global markets with the growing risks created by trade disputes, tariffs and changing government policies.
