Trump is scaring investors. The US is losing its appeal, which creates new opportunities for Europe and Germany. But will they be used?
Time is running out: July 9th is the deadline for reaching a trade agreement between the US and the EU. It is not yet clear whether the tariffs imposed by Washington will remain high for a long time, nor is it known what retaliatory measures the EU might take. However, foreign investors are already looking at the US economy with more skepticism and at the same time showing more interest in Europe and especially Germany.
Since Donald Trump took office, the US dollar has lost ten percent of its value against the euro. The US currency also fell against the British pound and the Swiss franc.
IMF and Bundesbank criticize the US
The International Monetary Fund (IMF) criticized the possibility of US debt getting out of control. And at the G-7 financial summit in Canada, Bundesbank President Joachim Nagel warned of new turmoil in financial markets if the trade dispute with the US was not resolved. "On certain days, I had the feeling that we were not far from a collapse in financial markets", Nagel said at the time.
Earlier, in an interview with "Financial Times", IMF Deputy Managing Director Gita Gopinath warned that US budget deficits were too large and that the country needed to deal with its "constantly growing" debt burden. According to the US Treasury Department, the country is in debt by a huge amount, amounting to over 36 trillion dollars. The US budget deficit is estimated at more than 6.5% of economic output in 2025.
Increasing criticism of the US
Economist Hans-Werner Zinn believes that the possibilities of the current US debt model are decreasing. "Americans need to tighten their belts. A standard of living with more shopping malls than factories cannot be maintained for much longer," said the expert and former chairman of the Ifo Institute.
The chief economist of the World Trade Organization (WTO), Ralph Osa, understands why the US is looking for ways to reduce its trade deficit with the European Union. But he also shares the opinion of most experts. "From an economic perspective, everyone thinks that tariffs are not the right way to address this problem," Osa says. He compares this to someone who buys more than they earn and thus falls into debt. "If I have a problem with buying too many cars, of course I could impose tariffs on them so that I don't buy as many. But that's not the best way to deal with the situation," says Osa.
"Completely changed" sentiment towards Europe and Germany
The fact that Trump's aggressive tariff policies are pushing investors away and making them turn to Europe is also confirmed by Stefan Wintels, who heads the German bank KfW. "Many institutional investors have overinvested in the US and would now prefer to focus on Europe and Germany in particular,", Wintels told "Handelsblatt".
In just a few months, sentiment towards Europe and Germany among international investors has completely changed. "In my thirty years of professional experience, I have never seen such a sharp change in sentiment", says the CEO of KfW. "We must do everything we can to take advantage of this positive momentum for Germany and Europe."
Is Europe fighting back?
Europe is also attracting international big companies such as "Blackstone", the world's largest alternative asset manager. The company's CEO Steve Schwarzman has announced plans to invest up to $500 billion in Europe over the next ten years. At a time of geopolitical turmoil, Europe is becoming increasingly attractive to investors - not least because of Germany's multi-billion-dollar infrastructure and defense investment packages.
Brussels is aware that the EU needs to improve the efficiency of its market. In light of a possible global trade war, the European Commission wants to tackle the "ten greatest evils" of internal trade. A leaked confidential document shows that to compensate for a 20% drop in exports to the US, for example, a 2.4% increase in intra-EU trade in goods would be sufficient. This should be made possible, among other things, by cutting red tape. Small and medium-sized enterprises would benefit most from this, as it would be easier for them to operate across national borders in the European Union.
Trade agreements cannot be negotiated for years
There is agreement in Brussels that free trade agreements with partners such as India and Indonesia should also be expanded, and that it can no longer be negotiated for two decades, as was the case with the "Mercosur" agreement, for example.
Europe has already taken advantage of the new situation. The "SuperReturn International" investor conference in Berlin in early June brought together thousands of large investors, including pension funds, insurance companies and sovereign wealth funds from around the world - with assets under management worth a total of around 46 trillion euros. According to "Bloomberg", managers of large investors such as BC Partners, Permira and Brookfield Asset Management have spoken out in favor of Europe as a favorable place for investment due to growing global economic risks. And the New York-based financial giant Apollo Global Management, which has already invested around 100 billion dollars of its approximately 800 billion. dollar assets in Europe, wants to pay even greater attention to Germany over the next ten years.