Population - 82,927,920
The German economy is the world's fourth largest and accounts for more than one-fifth of the European Union’s GDP. Germany is the United States' largest European trading partner and the sixth largest market for U.S. exports.Germany is the largest consumer market in the European Union with a population of 82.3 million.
Germany is the world’s third-largest exporter. Every fourth job in Germany depends on exports, which accounted for 38.5% of Germany’s GDP in 2016 (three times the export share of U.S. GDP)
The significance of the German marketplace goes well beyond its borders. An enormous volume of trade is conducted in Germany at some of the world’s largest trade events, such as MEDICA, the Hannover Fair, Automechanika, and the ITB Tourism Show.
Demand has begun to shift from exports to consumption and investment, which are projected to remain the main driving force for growth in the near-term. Despite budget surpluses and strong corporate profitability, investment (other than construction) remains somewhat subdued.
Demographic changes and resulting labor shortages, regulation of the labor market, and higher energy prices due to the phase-out of nuclear energy in favor of renewable sources (“Energy Transition”) are seen as factors that could dampen competitiveness. Despite these challenges and the risk of a global trade conflict, all economic institutes expect Germany’s current economic upswing to continue due in part to higher government outlays.
German policy poses relatively few formal barriers to U.S. trade or investment, apart from barriers associated with EU law and regulations. Germany has pressed the EU Commission to reduce regulatory burdens and promote innovation to increase EU member states’ competitiveness. Germany’s acceptance of the EU’s Common Agricultural Policy and German restrictions on biotech agricultural products represent obstacles for key U.S. products. While not overtly discriminatory, government regulation by virtue of its complexity may offer a degree of protection to established local suppliers. Zealous application of safety and environmental standards can complicate access to the market for U.S. products. American companies interested in exporting to Germany should make sure they know which standards apply to their product and obtain timely testing and certification. Compliance with German standards is especially relevant to U.S. exporters, as EU-wide standards are often based on existing German standards.
Germans are responsive to innovative high-tech U.S. products, such as computers, computer software, electronic components, health care and medical devices, synthetic materials, and automotive technology.
Certain agricultural products also represent good export prospects for U.S. producers. In many cases, price is not the overriding factor for German buyers, but quality and reliability.
In 2017, bilateral trade in goods and services totaled nearly $238 billion, with U.S. exports of $85 billion and imports of $153 billion. Most of the $68 billion trade deficit in 2017 was in goods; bilateral trade in services ($66 billion in 2017) is roughly in balance, with a U.S. deficit of $3 billion (up 73% from 2016 but in line with historic norms). Major U.S. export categories to Germany in 2016 (latest data available) were vehicles ($7.6 billion), optical and medical instruments ($6.1 billion), machinery ($6.1 billion), aircraft ($6.0 billion), and electrical machinery ($4.8 billion). Major categories of German exports to the United States in 2016 were vehicles ($29.0 billion), machinery ($23.0 billion), pharmaceuticals ($13.0 billion), optical and medical instruments ($9.0 billion), and electrical machinery ($7.8 billion). Many U.S. imports from Germany are high-end investment goods such as capital equipment, making possible U.S. production and exports. German investments in the United States focus largely on manufacturing and wholesale, as well as finance and insurance. Altogether, U.S. affiliates of German firms employ over 670,000 American workers. Together, our companies represent over one million jobs on both sides of the Atlantic.
The German market is decentralized and diverse, with interests and tastes differing from one German region to another. Successful market strategies take into account regional differences as part of a strong national market presence. Experienced representation is a major asset to any market strategy, given that the primary competitors for most American products are domestic firms with established presences. U.S. firms can overcome such stiff competition by offering high-quality products and services at competitive prices, and locally based after-sales support.
For investors, Germany’s relatively high marginal tax rates and complicated tax laws may constitute an obstacle, although deductions, allowances and write-offs help to move effective tax rates to internationally competitive levels.
Treaties and Agreements
The U.S.-German Treaty of Friendship, Commerce and Navigation affords U.S. investors national treatment and provides for the free movement of capital between the United States and Germany. Taxation of U.S. firms within Germany is governed by a protocol on the avoidance of double taxation.
Germany and the United States belong to a number of the same international organizations, including the United Nations, North Atlantic Treaty Organization, Euro-Atlantic Partnership Council, Organization for Security and Cooperation in Europe, G-20, G-7, Organization for Economic Cooperation and Development, International Monetary Fund, World Bank, and World Trade Organization. Germany also is an observer to the Organization of American States.