According to a new report from global consultancy Ernst & Young (EY), the number of investment projects by US companies in Germany fell sharply by 27% in 2024, dropping to just 90 projects—the largest decline among all leading European destinations. This sharp fall is a wake-up call for Europe’s largest economy, as foreign investors increasingly look elsewhere due to systemic issues and international policy shifts. The findings suggest a broader realignment of global investment flows, with China overtaking the US as Germany’s top foreign investor.
US-Germany Investment Ties Face Strain
While the United States has traditionally been a key investor in Germany, 2024 marks a pivotal downturn in the relationship. EY’s head of Germany, Henrik Ahlers, emphasized that US investment dropped by only 11% across the rest of Europe, making Germany’s 27% decline stand out significantly.
The consultancy attributes this shift to the “aggressive and erratic tariff policy” of the US government, which has created an unstable environment for international investments. This uncertainty has led many American companies to put German expansion plans on hold, prioritizing safer and more predictable domestic or alternate foreign investments.
China Overtakes the US as Germany’s Top Investor
In a landmark shift, China surpassed the US to become Germany’s largest foreign investor in 2024, with 96 projects, despite a modest 3% year-over-year decline. According to EY, Germany continues to be the most attractive European destination for Chinese firms, a trend that shows China’s continued strategic interest in Europe’s biggest economy.
This development signals a changing dynamic in global investment, with China seizing more space as the US pulls back. It also underscores the resilience of Chinese investments, even in a difficult macroeconomic climate.
Germany’s Foreign Investment Drops to 13-Year Low
The broader picture is equally grim. EY’s study reveals that the total number of foreign investment projects in Germany fell by 17% to 608 in 2024—the lowest level since 2011. This decline was significantly sharper than the overall 5% drop in international investment projects across Europe, which totaled 5,383 projects.
Germany now lags behind both France and the United Kingdom in attracting foreign direct investment (FDI), as both countries continue to offer more appealing environments for international business.
Why Is Germany Losing Its Investment Appeal?
Henrik Ahlers bluntly outlined the reasons behind Germany’s declining attractiveness:
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High tax burdens
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Elevated labor costs
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Rising energy prices
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Excessive bureaucracy
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Slow permitting processes
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Sluggish overall economic growth
In contrast, France, the UK, and other European countries have taken bold steps to enhance their business climates. From digitized public services to streamlined regulation, these nations are increasingly outpacing Germany in competitiveness.
Can Germany Reverse the Downtrend?
The German government’s newly announced multi-billion-euro investment package aims to reverse the decline in FDI. However, Ahlers cautions that financial stimulus alone will not suffice. The country must also implement:
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Faster permitting and licensing systems
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Stable and predictable regulatory environments
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Lower corporate taxes
Only then, Ahlers asserts, can Germany reclaim its position as a top destination for foreign investors.
A European Shift in Investment Patterns
Germany’s investment woes are part of a broader trend. Europe as a whole saw a 5% decline in new and expanded foreign investment projects in 2024, indicating that global economic uncertainties and trade policies are reshaping capital flows. However, Germany’s outsized decline suggests structural and policy-based issues are compounding the impact of these global trends.
Meanwhile, countries like France and the UK are benefiting from relatively more adaptive economic strategies, retaining their lead in the European investment landscape.
A Critical Juncture for Germany’s Economic Future
The 27% drop in US investment projects in Germany is more than just a statistic—it’s a reflection of Germany’s deteriorating business climate and a wake-up call for policymakers. As China rises to become Germany’s top investor, the shift in global economic alliances becomes increasingly visible.
Germany stands at a crossroads. Without urgent reforms in taxation, regulation, and bureaucracy, the country risks falling further behind in the global race for investment capital. The time to act is now.
