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29 April, 2022

How has Covid-19 impacted the FDI relationship between the US and Germany?

Covid-19 caused FDI levels to plummet in 2020 before a recovery in 2021, but did the relationship between the US and Germany follow this pattern?

By Glenn Barklie

In 2020, the US received 1,696 greenfield FDI projects, while there were 1,567 projects recorded going into Germany, according to GlobalData’s FDI Projects Database. These countries were the top two destinations for FDI that year.

The number of projects going into the US fell sharply in a Covid-19-affected 2020, decreasing by 11% from 2019. During the same period, the number of greenfield FDI projects into Germany actually grew by 16%.

US outbound FDI into Germany

US-based companies created 271 projects in Germany in 2020. This represented a 2.9% decrease compared with 2019.

Nominally, US-based companies primarily invested in the software and IT services, consumer goods, and business and professional services sectors in Germany. Combined, these three sectors accounted for 38% of total US outbound FDI projects destined for Germany in 2020.

Top US-based investors in Germany included Amazon, Panattoni and Best Western International . Combined, these companies accounted for 15% of total project flows in 2019–20.

In terms of total US outbound FDI projects, Germany ranked as the second-largest recipient country in 2020. It was the third-largest recipient in 2019.

US-based companies primarily established operations in Baden-Wurttemberg. In fact, 19% of projects into Germany by US companies were located there in 2020. Bavaria and Nordrhein-Westfalen were the next most popular subnational destinations.

German outbound FDI into the US

Germany-based companies created 219 projects in the US in 2020. The number of projects fell by 13.1% compared with 2019.

Automotive, software and IT services, and logistics were the top sectors in which German companies were investing in the US. Combined, these three sectors accounted for 40% of total German outbound FDI projects destined for the US in 2020.

Top German-based investors in the US included Deutsche Post , Porsche Automobil and Engel & Volkers Development. Combined, these companies accounted for 13% of the total number of German-headquartered projects established in the US in 2019–20.

The US ranked as the leading recipient country of German outbound FDI in 2020. It was also the leading recipient in 2019.

Germany-based companies primarily established operations in California. In 2020, 10% of all German outbound projects destined for the US were created in California. Texas and New York were the next most popular subnational destinations.

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