Foreign trade

Germany gears up for record foreign investments

Hapag-Lloyd –
Foreign trade is booming - with some exceptions. Source: dpa

German industry is expected to make record investments abroad this year. Every third German company that is active overseas expects to increase its foreign investments this year, according to the German Chamber of Industry and Commerce (DIHK). This will create 200,000 new jobs worldwide, said DIHK foreign trade expert Volker Treier, based on a survey of 5,000 companies. The study is available exclusively to Handelsblatt.

The reason why German companies are investing in their supply chains worldwide is the strong economic growth across all continents. Europe is particularly popular: 63 percent of companies with foreign activities plan investments in the euro zone – two years ago it was only 55 percent. “The stronger the headwind from protectionist tendencies worldwide, the more importance Europe gains,” said Mr. Treier.

In fact, German companies want to invest globally just as much or more than in 2017 – except in Eastern Europe, Russia, Turkey and North America. Only 35 percent, as in the previous year, will invest in North America. “The new US government causes uncertainty,” said Mr. Treier: “The protectionist trade policy course could cut off international production chains.” That is why US investments are difficult to plan.

“The stronger the headwind from protectionist tendencies worldwide increases the more importance Europe gains.”

Volker Treier, foreign trade expert, DIHK

Although the US tax reform promoted the inclination to invest at the start of the year, it could not overcome the overall caution of companies. “The announcement and partial introduction of US tariffs on steel and aluminum as well as possible counter-reactions cancel out the partially positive impact of the tax reform,” Mr. Treier explained.

US President Donald Trump has put global economies in a state of alarm with his trade policies. “Companies are for instance worried that the North American Free Trade Agreement renegotiations will create new tensions in regional supply chains,” added Mr. Treier.

Each new tariff that the US President threatens to impose deepens the uncertainty of companies. Dieter Kempf, president of the Federation of German Industry, sent a call for help to the G7 nations on Wednesday together with his counterparts from the US, Japan, France, Great Britain, Italy and Canada.

“We urge our governments to keep markets open and to strengthen the World Trade Organization (WTO),” said a joint statement by the B7, representing the business community of the G7 countries. “The US is undermining the multilateral trade system of the WTO. That harms everyone, including the US itself, ” warned Mr. Kempf.

On the domestic front in Germany, however, things are looking up. For the first time in years, German industry wants to invest just as strongly in Germany as abroad. Some 80,000 new manufacturing jobs will be created in Germany, for a total of  600,000 new jobs. When companies strengthen their position in the world market, this leads to more domestic orders.

Mr. Treier also sees foreign investment as a counter-argument against criticism of the German export surplus: “A good part of the surplus ensures more employment in many different countries,” he said. Overall, around 7.6 million employees in German companies are expected to work abroad by the end of 2018.

Donata Riedel covers economic policy for Handelsblatt. Annett Meiritz in Washington, DC, and  Jan Dirk Herbermann in Geneva contributed to this report. Stephanie Ott in New York adapted this article into English for Handelsblatt Global. To contact the author: riedel@handelsblatt.com.

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!