German Companies Increasingly Favor Asia Over US Investments

Only 44% of around 1,700 German manufacturers said they plan to invest in the US, down 4 percentage points from the 2025 survey and the first significant decline since the pandemic. The DIHK survey points to tariffs and trade-policy uncertainty under President Trump as a drag on US-bound investment, with firms shifting focus toward China and other Asian markets. The read-through is mildly negative for US investment flows and supportive for Asia ex-US allocation sentiment.

Analysis

The important signal is not just capital reallocation away from the US, but a likely re-pricing of “policy risk” into German industrial capex plans. If firms conclude US expansion now comes with tariff volatility and lower visibility, the marginal dollar is more likely to go into Asia where supply chains can be built around export hubs, local demand, and less headline-driven policy whiplash. That is a relative negative for US-bound greenfield manufacturing, logistics, and industrial automation names that rely on German project flow.

Second-order winners are likely to be Asian industrial ecosystems that sit one step removed from the tariff crossfire: Singapore, Vietnam, Malaysia, India, and selected China-adjacent manufacturing clusters. German firms do not need to choose “China” exclusively to express the trade-away; they can route procurement, assembly, and distribution through friendlier jurisdictions, which supports port throughput, industrial parks, and local banking/credit creation in those markets over a multi-quarter horizon. The loser set is broader than the US alone: Central European suppliers tied to transatlantic German production decisions may see weaker order visibility if companies defer or redesign expansion plans.

The contrarian risk is that this may be more of a survey-driven sentiment dip than a durable capex migration. If tariffs are negotiated down, or if the US offers targeted industrial incentives, German management teams could re-accelerate investment within 1-2 quarters; historically, capex intentions can reverse faster than plant relocations. But if trade policy remains unstable, the real damage is cumulative: fewer follow-on decisions, slower supplier qualification, and a longer-term erosion of Germany’s role as a bridge between US and Asian industrial value chains.

For positioning, the cleanest expression is relative rather than outright directional: long Asia-exposed industrial beneficiaries versus short US industrials with German customer concentration. The trade works best if the market is still pricing tariff rhetoric as noise and not as a persistent hurdle to cross-border manufacturing allocation.

Key Decisions for Investors

• Long EWW / short IWM for 3-6 months: express relative preference for Europe/Asia-capital-allocation stability versus US domestically exposed cyclicals; stop if US tariff rhetoric de-escalates and German capex surveys rebound.
• Long VXUS or EEM / short XLI for 2-4 quarters: industrials are the most directly exposed to deferred cross-border capex, while broader EM captures rerouted manufacturing investment; target a modest 2:1 payoff if the theme persists.
• Long selected Asia logistics/industrial infrastructure names on pullbacks — e.g., SGX-listed port/logistics proxies or India manufacturing beneficiaries — for 6-12 months, with upside tied to incremental German vendor localization and supply-chain rerouting.
• Avoid or underweight US industrial automation and capital goods names with high European/German order exposure for the next earnings season; the risk is not immediate demand collapse but slower bookings and weaker forward guidance.
• Consider buying 3-6 month puts on a basket of US export-sensitive industrials if implied volatility is still cheap; this is a low-conviction hedge against a second leg of capex diversion if tariffs harden further.