By David Born and Christian Krys

While the U.S. economy is showing surprisingly robust growth and has even avoided the recession many market participants anticipated, the German economy continues to struggle to revive growth. This widening gap between the two countries is also evident in this year's Transatlantic Business Barometer.

The companies surveyed in the Transatlantic Business Barometer 2024 additionally indicate that protectionism is increasingly considered a challenge. This is one of the key findings of the Transatlantic Business Barometer 2024, produced jointly by the American Chamber of Commerce (AmCham) and Roland Berger. The study, conducted in April and May 2024, polled the views of U.S. companies operating in Germany and German companies with business operations in the United States.

Companies on both sides of the Atlantic worry about protectionism

German companies based in the U.S. already expressed concerns about rising protectionism in last year’s survey. This year, U.S. companies operating in Germany indicate similar worries. Among German companies, 90% report concerns about trade-distorting measures, while about 70% of U.S. companies share this sentiment. Last year, only 17% of U.S. companies were worried about protectionism. These findings may serve as a mandate for policymakers in Europe and the U.S. to lower trade barriers.

Germany is losing ground to the U.S. as a business location

Protectionism puts significant pressure on Germany's export-oriented economy. However, Germany’s economy is also increasingly under pressure from deteriorating domestic business conditions. This is evident from the steadily declining overall assessment of Germany as a business location by U.S. companies operating in Germany. While more than 90% of U.S. companies rated Germany as a business location as good or very good back in 2018, this year only 31% did so.

U.S. companies criticize high costs for energy (84% of the surveyed U.S. companies rate these as less good or bad), economic and industrial policy (61%), the quality of digital infrastructure (61%), and labor costs (8%). The predictability of investment conditions is also criticized (53%).

In contrast, German companies have consistently rated the U.S. as a prime business location for years. Eight out of ten companies surveyed stated that the U.S. is a good or very good location. The main complaint German businesses have about the U.S. is the overall reliability of politics, with 65% of the companies surveyed rating it as not so good or bad.

U.S. companies growing more hesitant about investing in Germany

The deteriorating business conditions in Germany are evident not only in companies' assessments but also in a tangible reluctance to invest in Germany. Only 38% of the U.S. companies surveyed reported increasing investments in Germany over the past year. For the current year, 39% of the companies surveyed expect to increase their investments. However, more than a quarter of the respondents reduced their investments in Germany last year, and 24% expect to reduce their investments in 2024 as well.

In contrast, German companies in the U.S. have significantly increased their investments. 70% of the companies surveyed reported increasing investments in 2023, and 60% plan to further increase their investments also in this year.

Both business locations continue to show great strengths

The potential of the American sales market is among the reasons for the investment boom in the U.S., as evidenced by the study results. 85% of the German companies surveyed rated the U.S. sales market potential as good or very good. Additionally, 80% of companies praised the environment for entrepreneurship and start-ups. German companies also commend the quality of the digital infrastructure in the U.S.

Also, Germany still has a number of strengths highly appreciated by U.S. companies, on which the German economy can build on to re-vitalize its attractiveness as a business location. The surveyed U.S. companies especially commend the quality of the workforce, the excellence of research and development (R&D), and the strength of supplier networks in Germany.

For the Transatlantic Business Barometer 2024, 38 U.S. companies with a business base and revenue of at least € 36 billion in Germany as well as 30 German companies with a business base and revenue of more than € 72 billion in the U.S. were surveyed in April and May 2024.