German Firms Pour More Money Into China As US Investment Falls 65%

German companies increased their investment in China by a third in the first half of 2026, while investment in the United States plunged nearly two thirds, highlighting how trade tensions and US tariffs are reshaping corporate investment decisions. The figures come from a German Economic Institute (IW) study based on Bundesbank data.

German firms invested about €5.6 billion in China during January to June, up by a third from the same period last year. The figure was broadly in line with the average half year investment level recorded between 2020 and 2025, suggesting that companies continue to maintain significant operations in the Chinese market despite concerns over economic dependence.

By contrast, German investment in the United States fell 65% year on year to around €4.3 billion. Compared with the first half of 2024, the period before US President Donald Trump returned to the White House, investment was down by nearly 80%, according to IW calculations.

The sharp fall comes amid Trump's tariffs and trade tensions, which have increased uncertainty for German companies operating in or considering investment in the US.

IW economist Jürgen Matthes said German companies have little choice but to continue investing in China, which remains an important sales market and production base. He described China as a "gym" where German companies can build their competitive strength.

Matthes also argued that Chinese state subsidies and an undervalued yuan make production in China artificially cheap. This is encouraging German companies to expand their local operations so they can compete with Chinese rivals in global markets.

"For Germany, this means production and jobs are shifting to China," Matthes said, calling on the European Union to respond with countervailing tariffs on Chinese imports.

The investment shift comes as Germany faces a difficult trade environment. German exports to China fell 9.5% month on month in July, while exports to the US surged 19.1%, showing that investment and trade flows are moving in different directions.