Success of subsidy program: Study: German companies now prefer to invest in the USA

Subsidy program success
Study: German companies now prefer to invest in the USA

The Inflation Reduction Act (IRA) subsidy package is having an effect. According to a study, German companies are increasingly scorning their homeland because they are offered grants in the United States. The German Chamber of Industry and Commerce warns of further “foreclosure”.

In view of the lavish subsidies in the USA, German companies intend to invest significantly more in the United States than in their home country. This is the result of the most recent evaluation of the German American Business Outlook (GABO) among 201 subsidiaries in the USA who were asked about their business prospects. According to the survey conducted by the German-American Chambers of Commerce, almost three quarters of the companies (72 percent) plan to increase their investments there in the current year, almost a fifth (22 percent) even want to spend more than 10 million dollars on it.

The automotive industry and the transport and logistics sector are showing the greatest growth in expenditure. Looking at the plans for the next three years, the survey shows that the construction and infrastructure sectors as well as industrial manufacturing are the leading sectors with the highest investments. This means that the investment intentions of German companies in the USA are significantly higher than in Germany itself, where they are still very cautious according to the results of the current economic survey by the German Chamber of Industry and Commerce (DIHK). The DIHK survey of around 27,000 companies from all sectors and regions nationwide will be presented on Thursday.

For 17 percent of the German companies surveyed in the USA, the Inflation Reduction Act (IRA) is a reason to increase their investments or expand their company. This $370 billion package of subsidies to promote climate-friendly technologies favors companies that produce in North America – which has alarmed the EU. The lower energy costs in the USA are only mentioned by three percent of the companies as an investment driver.

“It needs fair competitive conditions”

With regard to domestic companies, DIHK foreign trade chief Volker Treier sees a further need for better market access and the removal of trade barriers: “The USA remains our most important trading partner. And yet we are also in a tough competitive battle, not only in Germany and Europe, but everywhere in the world,” said Treier. “What is needed now are fair competitive conditions and no protectionist isolation.”

According to their own accounts, Germany and France received concessions from the American government when implementing the US subsidy package. “Substantial progress” has been made for the same rules, said France’s Economics Minister Bruno Le Maire recently in Washington. For example, the EU should be better off with the specifications for critical raw materials for certain products.

Le Maire and Federal Economics Minister Robert Habeck met with US Treasury Secretary Janet Yellen and Economics Secretary Gina Raimondo on Tuesday for the IRA. The background is the concern that the US regulations will bring disadvantages for European companies. In some cases, tax advantages are only granted if, for example, electric cars are manufactured in North America. There should be exceptions here, at least for leasing models, which could help European producers. The USA also ties subsidies to the fact that batteries, for example, are manufactured in North America.

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