San Francisco, gateway to the world? How international trade with the U.S. will develop remains to be seen
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German companies in the U.S. expect stable business despite slight declines, according to a special analysis from the current AHK World Business Outlook (WBO).
This fall, 3,500 companies worldwide took part in the AHK WBO survey conducted by the German Chambers of Commerce Abroad (AHKs). The results of this special analysis offer a nuanced perspective on the sentiment of German businesses operating in the U.S., amid global uncertainties and potential new trade restrictions – especially given the upcoming presidential election on November 5.
According to the analysis, 38 percent of these companies expect a better economic outlook locally over the next twelve months. While in Spring 2024, a higher 56 percent of U.S.-active companies had expected improvements, economic expectations in the U.S. still remain more optimistic than in recent years and are noticeably higher than the global average, where only 27 percent anticipate better economic conditions.
Volker Treier
© DIHK / Werner Schuering
"German firms, particularly in automotive, engineering, and renewable energy sectors, continue to benefit from the U.S. market's sustained demand and high innovation", says Volker Treier, Head of Foreign Trade at the German Chamber of Industry and Commerce (DIHK), who presented the report in Berlin.
The survey reveals that despite the impact of the election campaign on economic sentiment, the U.S. is holding up well globally. In fact, 55 percent of German companies in the U.S. rate their business situation as good, while only 8 percent consider it poor.
Although uncertainty about the election outcome is creating some tension among businesses, the U.S. remains a key economic location – largely because its business conditions are more favorable than in Germany. "The economic environment in the U.S. remains robust, yet there are signs of some investment hesitancy. Companies are waiting for more clarity on future economic policies", explains Treier.
Despite political uncertainties, 37 percent of German companies in the U.S. plan to increase investments, while 18 percent are considering reductions. Investment plans are thus below the long-term average for the U.S. "Overall investment willingness has dampened somewhat, which can be attributed to election-related uncertainty", adds the DIHK Foreign Trade Chief.
Nevertheless, the U.S. remains one of the most crucial markets for German investors. With nearly one million employees in U.S.-based German companies and stable employment intentions (46 percent plan to hire), the U.S. market continues to be a central growth driver.
While the general business outlook remains positive, companies in the U.S. also see increasing risks. The rise in perceived business risk related to economic policy conditions (49 percent) compared to Spring is a concern. Companies are particularly worried about potential increases in trade barriers (21 percent) and supply chain disruptions (33 percent).
"The prospect of more stringent trade policies, especially under a possible Trump administration, could heighten concerns about supply chain issues and trade barriers", warns Treier. "The U.S. election outcome could complicate the global economic framework, potentially straining international trade relations", he adds.
An especially concerning risk for German businesses is the prospect of new tariff policies, frequently mentioned in the campaign. This not only affects transatlantic trade but could also impact German business operations in other markets, such as China and Mexico.
Regardless of the election outcome, the U.S. remains an attractive market for German companies. Treier concludes, "The business environment in the U.S. is strong, but the potential for new trade barriers and supply chain disruptions tempers optimism. However, even in an election year, we do not foresee a radical decline in conditions that would significantly lower the current levels."
