Changes for German companies under US President Trump

The economic policy agenda of future US President Donald Trump will have a significant impact on the business activities of companies in the German-American economic corridor and beyond from 2025. In current studies and detailed analyses, we shed light on the possible consequences of a change of course in Washington – and how companies should react.

Donald Trump begins his second term as US President in January 2025. His credo remains "America first". This means that the agenda in the White House will be dominated by issues that Trump believes are fundamental to national interests. The envisaged economic policy realignment in Washington could have particularly far-reaching consequences for German companies. What can we expect? What preparatory measures need to be taken now? And how should companies adapt their strategy in order to continue to operate successfully on the US market? We present the most important details in a compact and precise manner.

Donald Trump wants to strengthen the USA as a business location by lowering corporate taxes and making the national or regional market less attractive for imported goods from abroad. Drastic protectionist measures at the expense of long-standing trading partners such as Germany are likely. Trump is also planning to deregulate various sectors, including the energy and financial sectors, and suspend ESG obligations.

German companies invested 15.7 billion euros directly in the USA in 2023. In the previous year, the figure was 8.2 billion euros. The Inflation Reduction Act (IRA), a package of measures by the Biden administration to promote climate-friendly technologies, was the main reason for the increase. German companies were very confident about their US business until recently. It is highly questionable what form the IRA will take under Trump.

The announced support measures for the American economy are boosting the location. The top corporate tax rate was already reduced from 35% to 21% during Trump's first term in office. He has now held out the prospect of a further reduction to 15% for companies that produce in the USA, while imports will become massively more expensive. At the same time, a more rigid migration policy – also announced – could exacerbate the shortage of skilled workers.

Changes or even a suspension of the IRA would slow down the sustainable transformation towards a climate-neutral economy: Subsidies for renewable energies would be eliminated, and "green" projects could no longer receive tax breaks. Meanwhile, oil and gas projects will become more lucrative. It is also to be expected that technology investments will increase significantly, as a number of government restrictions are likely to be removed.

Donald Trump is planning to introduce import tariffs of 10 to 20 percent across the board, not least because of the consistently high US trade deficit with the EU. If the EU were to respond to the new financial hurdles with retaliatory tariffs on US imports, Trump has said that he would immediately follow up: tariffs of more than 100 percent are even conceivable. This could trigger an escalating race of trade restrictions, which would also damage the USA as a business location.

According to analysts, new US tariffs could lead to an economic downturn of 1 to around 1.5 percent in Germany. A recession would then be inevitable. It is also possible that US companies will postpone planned investments in Germany or refrain from them altogether as conditions improve on the domestic market. Germany is already no longer a priority location for US investments in more traditional industries and its relevance could decline once again. However, the situation is different with regard to new business areas that are emerging in Germany in view of the major transformations. Greenfield investments worth billions of euros have recently been made from the USA in data centers, microchip factories and state-of-the-art production facilities for pharmaceutical products.

It is now essential to review export-oriented US business strategies. Business models that are based exclusively on exporting goods to the US, for example, could massively restrict competitiveness in the future. In order to secure access to the US market at competitive prices, it may be necessary to build up local production capacities. The value chain should be further regionalized – but divestments could also become sensible.

China is particularly in Trump's sights. He accuses the growing superpower of unfair economic policies at the expense of the US. It cannot be ruled out that Trump will link the maintenance of current trade links between the US and Europe to EU compliance in the fight against Chinese production and export strength. China, in turn, is just as important to German companies as the US and forgoing one of the two markets is not an option.

Donald Trump has the means to implement far-reaching measures, as both the US House of Representatives and the US Senate will be under Republican leadership from 2025. He is also better prepared now than when he was first elected. It is therefore conceivable that far-reaching structural changes will be made quickly, which can only be reversed with great difficulty after the end of his second term of office. The redirection of global trade flows, which have grown over decades and are characterized by a protectionist world view, would have serious long-term consequences, particularly for the export-oriented German economy.