Germany–US Economic Ties Cool as Investment and Exports Slide

A recent report by the German Economic Institute (IW) shows that Germany–U.S. economic and trade relations have come under significant strain since U.S. President Donald Trump took office in early 2025. Driven largely by rising policy uncertainty, Germany's direct investment in the United States and its exports to the U.S. have both weakened, marking a rare cooling of bilateral economic ties in recent years.

Analysts note that the sharp decline in German investment and exports not only weighs on Germany's economy but also signals a deterioration in the United States' attractiveness and competitiveness as an economic partner. Under the impact of the 'America First' policy approach, tensions in Germany–U.S. economic relations are evolving beyond trade data, extending into deeper issues such as industrial disruption, investment diversion, and growing strategic mistrust.

Investment Retreat, Exports Under Pressure

Data cited in the IW report highlight a pronounced downturn in German corporate activity in the U.S. over the past year amid heightened policy uncertainty.

Based on figures from the German central bank, Deutsche Bundesbank, German direct investment in the United States totaled €10.2 billion between February and November 2025, significantly lower than nearly €19 billion recorded in the same period a year earlier — a year-on-year drop of about 45%. From a longer-term perspective, German investment in the U.S. in 2024 was more than 24% below the average level recorded between 2015 and 2024.

German exports to the United States have also weakened markedly. According to the report, exports declined by around 9% year-on-year from February to October 2025. By sector, exports of automobiles and auto parts fell by nearly 19%, machinery exports dropped by about 10%, and chemical product exports declined by more than 10%. Analysts stress that these industries have long been pillars of Germany's industrial competitiveness, making their export slowdown a key indicator of deteriorating bilateral economic relations.

During the World Economic Forum in Davos, Oliver Blume, Chairman of the Board of Management of Volkswagen AG, stated clearly that without a significant reduction in U.S. tariff burdens, further investment in the United States would be difficult to sustain. He warned that plans for a new Audi plant could even be put on hold.

The German Economic Institute cautioned that Washington's recent release of new, threatening tariff signals has once again intensified market concerns over the outlook for transatlantic economic relations. German business circles broadly agree that the repeated emergence of tariff threats is continuously dampening investment and trade confidence, further exacerbating the challenges facing Germany–U.S. economic ties.

Deepening Rifts, Rising Concerns

As pressure mounts on bilateral relations, growing unease is emerging in Germany over the current direction of U.S. economic policy.

Sebastian Dullien, an economist at the Macroeconomic Policy Institute of the Hans Böckler Foundation, warned that the United States could increasingly be viewed as a high-risk market by German companies in the foreseeable future. Persistent tariff threats, he said, have severely undermined expectations that negotiations could stabilize transatlantic trade relations, raising doubts over whether the U.S. remains a reliable trade partner for the European Union.

Samina Sultan, an economist at the German Economic Institute, emphasized that rising uncertainty has a clear suppressive effect on investment and trade. She noted that the current U.S. economic policy trajectory is eroding corporate confidence and weighing on transatlantic economic exchanges, with lasting negative implications for the U.S'.s appeal as an investment destination and its long-term competitiveness.

A public opinion poll released in early January by Germany's ARD television network showed a decline in German public trust in the United States, with around three-quarters of respondents saying that 'the United States is not a trustworthy partner for Germany'.

Moritz Schularick, President of the Kiel Institute for the World Economy, argued that Germany should no longer anchor its economic development to dependence on the United States, but instead proactively expand investment in partner countries to diversify risks and strengthen economic resilience.

'Current U.S. foreign and economic policies are harming European and German interests,' said Ferdinand Dudenhöffer, a German automotive industry economist, calling on Germany to reassess its external economic strategy and reduce reliance on a single market.

Renewed Calls to Repatriate Gold Reserves

German media report that amid heightened uncertainty surrounding U.S. economic policy, some German officials and economists have raised concerns over the security of Germany's gold reserves stored in the United States, reviving calls to repatriate part of those holdings.

Germany holds the world's second-largest national gold reserves. For decades, more than 1,200 tonnes — over 30% of its total reserves — have been stored in the vaults of the U.S. Federal Reserve Bank in Manhattan, New York.

Der Spiegel recently cited Marie-Agnes Strack-Zimmermann, Chair of the European Parliament's Committee on Security and Defence, as saying that against a backdrop of rising geopolitical uncertainty and volatile U.S. economic policies, 'there is no reason to continue storing 37% of Germany's gold reserves in the United States.' She urged the German government to swiftly develop a plan to withdraw the gold.

Emanuel Mönch, a German economist and former head of research at the Deutsche Bundesbank, told Handelsblatt that given the current geopolitical environment, keeping such a large share of gold reserves in the U.S. carries risks, and that Germany's central bank 'needs to consider bringing these reserves back to Germany'.

This is not the first time calls to repatriate German gold have surfaced. Analysts say the cooling of Germany–U.S. economic relations reflects not only short-term disruptions to trade and investment, but also deeper fractures in transatlantic ties. As U.S. policy uncertainty rises and geopolitical competition intensifies, economic trust is weakening not only between Germany and the U.S., but across the broader EU–U.S. relationship — pushing Europe to place greater emphasis on strategic autonomy and diversified economic partnerships.