Big trouble for friendshoring: German firms slash investment in the US, to double down in China

Quick Overview

German firms are increasingly prioritizing investment in China, driven by its massive and growing consumer market and the need to secure supply chains, despite US tariffs and geopolitical tensions, while investment in the US has sharply declined due to policy uncertainty.

Key Points: German investments in the US nearly halved (down 45% from almost 19 billion euros to 10.2 billion euros) between February and November 2025, citing trade uncertainty under the Trump administration. Conversely, German firms' investments in China reached a four-year high in 2025, driven by the need to produce closer to where their customers are located. German exports to the US fell 8.6% from February to October 2025, marking the steepest drop since 2010 outside the COVID-19 period, with sharper declines in auto parts, machinery, and chemicals. The uncertainty caused by US policy shifts like tariffs and threats of duties leads firms to adopt a wait-and-see approach for US investment, as fundamental assumptions about the economic environment are questioned. China is projected to remain the world's largest consumer market in 2050 at 1.1 billion people (growing 15% from 2024), with India close behind at 773 million (growing 46%). Germany's manufacturing economy is expected to see all growth outside of Germany, and the country is projected to drop three spots in consumer market rank by 2030, falling to 11th place, while Indonesia jumps to 4th.

Context: The video discusses the shifting landscape of German foreign investment, contrasting the decline in investment into the United States with the simultaneous surge in investment into China. This shift is analyzed through the lens of US trade policy under the Trump administration, which introduced tariffs and uncertainty, pushing German manufacturers to seek stability and proximity to growing consumer bases, primarily located in Asia.

Detailed Analysis

The video argues that German firms are slashing investment in the US and doubling down on China due to geopolitical and supply chain pressures, specifically citing a Reuters report. German investments in the US dropped by roughly 45% in the first year of the Trump administration (February to November 2025), falling from nearly 19 billion euros to 10.2 billion euros, primarily due to trade uncertainty, tariffs, and threats of additional duties, causing firms to adopt a wait-and-see approach. Simultaneously, German investments in China rose to a four-year high, as firms like EBM-Papst invested 30 million euros to expand Chinese operations to be closer to their growing customer base. Data projections for 2030 show that consumer market growth is centered in Asia: China remains number one (1.1 billion consumers, up 15% from 2024) and India is second (773 million, up 46%). Indonesia is set to become the fourth-largest consumer market by 2030, surpassing Japan and Germany, which is projected to fall slightly in rank. This dynamic indicates that manufacturers are moving production to secure supply chains and serve the fastest-growing consumer markets, which are overwhelmingly in Asia, rather than the US or Europe.