By David Born and Christian Krys

The German and US economies are closely intertwined – not only through trade relations but also through the many subsidiaries of US firms located in Germany and German firms located in the US. The new administration in the United States makes many of these companies hopeful of better transatlantic relations. Particularly against the backdrop of the ups and downs experienced in fiscal 2020, the "Biden effect" gives businesses cause for optimism. This is illustrated by the results of the Transatlantic Business Barometer 2021, a survey of AmCham Germany members conducted jointly with Roland Berger.

The economic slump in 2020 clearly left its mark on the companies surveyed – US businesses in Germany and German businesses in the United States. Much less than half of them reported an increase in revenues in 2020, and fewer companies than in previous years recorded a positive development in investments and employee numbers. It is noticeable that this dip was more pronounced among German companies in the US than among subsidiaries of US firms in Germany. The survey respondents do not see the general business climate as being affected by the slump in 2020: On both sides of the Atlantic, companies are once again looking to grow in 2021.

Companies expect better transatlantic trade relations

The positive expectations are spurred by the election of Joe Biden as the new US President, with the majority of the American subsidiaries surveyed in Germany anticipating a significant improvement in transatlantic trade relations. The companies pin their greatest hopes on progressive trade liberalization as well as mutual alignment towards multilateral institutions such as the World Trade Organization (WTO). Non-tariff trade barriers are the only area in which a small majority of firms expect to see no change.

Most US subsidiaries in Germany expect an improvement in transatlantic trade relations

The "Biden effect" is even more evident among the subsidiaries of German companies in the United States. More than two-thirds of firms are hopeful of better transatlantic trade relations in 2021, particularly with regard to mutual alignment on the world stage. Among German businesses in the US, too, the area in which the smallest proportion of respondents expects to see an improvement is in non-tariff trade barriers, with as many as 12 percent of firms fearing a deterioration in transatlantic trade relations.

The majority of German companies in the US expect transatlantic trade relations to improve

Criticism of Germany as a business location

Besides considering companies' direct business as well as transatlantic relations, the Business Barometer also shines a light on location factors in Germany and the United States. It thus serves as a regular "pulse check" and identifies areas where political action may be needed. German companies in the US give their business location a good report card – a total of 76 percent of those surveyed rate conditions there as good or very good. In particular, the general conditions for startups and entrepreneurship are praised, while the quality of infrastructure and the reliability of policy-making are rated as most in need of improvement.

Among American subsidiaries in Germany, the majority (63 percent) also rated the location factors as good or very good. Back in 2018, however, a full 91 percent of respondents held this opinion. This lower satisfaction with Germany as a business location can be seen as a clear call to action for policymakers. In addition to high energy costs, the quality of the digital infrastructure and the conditions for startups and entrepreneurship are considered particularly in need of improvement. The quality of the workforce and the strengths in research are picked out as positive highlights. The general reliability of policy-making is also rated as good or very good by two-thirds of companies.

For the Transatlantic Business Barometer 2021, 41 US companies with locations and revenue of roughly €75 billion in Germany as well as 31 German companies with locations and revenue of more than €50 billion in the US were surveyed in February and March 2021.