Low prices for energy, tax breaks and at the same time the dependence on China is reduced: the USA is currently attracting German companies almost magically. With success, but also with pitfalls. Is the “Go West” trend really working?

For years the industry in the USA has been playing blues instead of rock

Production in the USA also makes ecological sense, they say: After all, states like Oklahoma will soon be phasing out coal – the electricity will then come from CO2-free nuclear power plants. The bottom line is that the ecological footprint is reduced. A story that in the country of nuclear phase-out, ie in Germany, is noted with some irony.

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It’s no wonder that many a German company takes a close look. Various companies are planning the construction of new production facilities or their expansion. These include above all companies that consume a lot of energy, above all manufacturers of aluminium, cement or steel. Dax companies such as Bayer and BASF are opening new centers in these weeks and Aldi and Lufthansa are also expanding. Some of the states even send managers to Germany who, on their own account, determine exactly what is needed in the company – all to make it easier to get started in the USA.

The federal government has taken note of the trend, but is in a difficult position. On the one hand, she wants to keep production in Germany and points out that a relief package will keep the location attractive. In addition, the high energy prices are not permanent, it is said. Evidence of this are the current liquid gas agreements with the USA, Canada and the Gulf States. On the other hand, politics can only be right if German companies reduce their dependence on China. Accordingly, she finds it difficult to badmouth her increasing commitment in the USA. Above all, car companies such as VW, BMW or Mercedes are investing heavily in the USA so that the mainstay becomes stronger and China no longer dominates as much.

But German companies also have to master challenges in the USA that they are not familiar with in their home country. For one thing, there are cultural differences, particularly in the southern states, where Republicans are tightening abortion laws, among other things. Oklahoma Gov. Kevin Stitt says, “We are a state that is very committed to unborn life. Many companies like this, some may not. But we are culturally very decided.”

There are also legal pitfalls that can hamper the free market economy, to say the least. The investment control of the USA – called CFIUS – also examines German companies more closely. In 2017, for example, the authority banned the takeover of Wolfspeed by the German group Infineon. Secondly, there are very different views between some states and European law as to what is sustainable and what is not. States like Texas, Florida or West Virginia are very sensitive when companies disadvantage their local fossil fuel industries. These so-called “ESG defense laws” will probably become more common after the midterm elections in November. The Republicans, who are not so keen on sustainability, are expected to gain strength.

Third, both Democrats and Republicans are pushing ahead with legislative reform that could soon take effect. The “National Critical Capabilities Defense Act” probably lives up to its name and scrutinizes companies that are also active in China. And that probably applies to the vast majority of German companies. Anyone who invests there in certain areas must then also register in the USA. This applies, for example, to areas such as medicines, artificial intelligence, semiconductors and battery technology. So all sectors in which German companies are very active.

The expansion of activities in the USA may seem logical, but the states also have their own advantages in mind and nothing is given away. And how things will continue in the United States if Donald Trump or someone of his caliber is elected the next US President at the end of 2024 is another question anyway.

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