Successfully investing in the USA

last updated on 7 June 2024 | reading time approx. 4 minutes

How do you assess the current economic situation in the USA? »
How would you describe the investment climate in the USA? Which sectors offer the largest potential? »
What challenges does a German entrepreneur face when it comes to engagement in the USA? »
How do you assess the future of the automotive industry in the United States? »
How do you think the USA will develop? »

How do you assess the current economic situation in the USA?

The overall economic situation in the USA is extremely robust, with a gross domestic product growth of 2.5 percent in 2023 and forecasted growth of 2.7 percent for 2024.

In recent years, the employment rate in the U.S. has increased further and significantly exceeded pre-pandemic levels. In 2024, 162.2 million people will be employed, which is an increase of 4 million people compared to 2022.

After inflation peaked in 2022 at a monthly rate of up to 9.1 percent, prices have settled to a more reasonable level of 3.2 percent in 2024. The US Federal reserve has combatted inflation through a series of interest rate hikes since the spring of 2022 up to the current level of 5.5 percent.

Based on the general conditions, the market is expected to remain stable in the long term.

How would you describe the investment climate in the USA? Which sectors offer the largest potential?

Various investment or subsidy programs such as the “Inflation Reduction Act” and the “Clean Energy Program” as well as the “Chips and Science Act” has strengthen companies through government subsidies for various investments. The combination of these far-reaching legislative initiatives is intended to strengthen the U.S.A., above all as a production and technology hub and to strengthen the respective emerging technologies and industries.

In addition, tariffs can have a significant effect on the willingness to invest in the U.S. and strengthen development here in the long term.

Moreover, the very robust domestic demand in combination with the expected continued economic growth leads to a generally very friendly positive investment outlook. The additional effect of protectionism and government subsidies for investments in the USA with the aim of increasing local content reinforces this optimistic climate.

Based on the government subsidies, industries with significant future potential for growth include the fields of renewable energies and environmental technology, and information technologies including artificial intelligence and software development.

However, established sectors such as the automotive, pharmaceutical and biotechnology industries offer innovative German companies a potential for further development.

In the short and medium term, there are significant opportunities in the American market, particularly for solidly managed, equity-strong German family-owned businesses (“Mittelstand”). As the largest economy, the U.S. will in the long term continue to grow, but with a significant increase in locally generated value added.

What challenges does a German entrepreneur face when it comes to engagement in the USA?

The USA has a business-friendly environment whose corporate tax rates are, in part, similar to those in Germany, but with fewer bureaucratic hurdles. The measures introduced to strengthen local value creation (on-shoring of manufacturing) in the U.S. through trade and customs barriers as well as actual economic stimulus and transformation programs, lead to additional opportunities for market entry into the U.S..

Cultural differences, such as the way of communication and different consumer habits based on the region, and the challenge of finding qualified personnel, continue to pose a challenge for new employers. It is important to keep in mind that a company launching business in the U.S. starts often as an unknown, with a lack of brand or name recognition in the new market.

Therefore, it is essential in the U.S. to be proactive and to be visible online and in social media as well as in networking with stakeholders such as suppliers, customers, industry associations or government agencies.

The complex legal and tax system with federal, state, and local levels also requires careful planning of engagement in the U.S.. The U.S. market is dynamic and changes quickly, so companies need to be flexible.

By taking the proper aspects into account in planning and preparing for a market entry in the U.S., German companies can improve the chances of success and minimize potential stumbling blocks.

How do you rate the options for companies wanting to invest directly in the United States?

It is improbable that a newly elected government will change the current course of strengthening the domestic market in the U.S. by turning away from protectionism and the associated positive development of the gross domestic product and the labour market in the U.S..

Establishing a local business presence in the U.S. is a preferred solution to circumvent trade restrictions. An additional benefit is that Americans prefer to do business with partners in their own country. Having your own local business presence makes it clear that you are committed to the U.S. market for the long term and that it is not just a temporary activity.

It is also important to take into account the efforts already initiated by the federal and state tax authorities in the U.S. to analyse the taxability of non-resident corporations' activities in the area of income tax and sales tax more closely in order to identify additional sources of taxes for those agencies.

How do you think the USA will develop?

In view of the current market environment in the U.S., the measures already introduced to protect the US economy, and stimulus projects that are already underway, the economic outlook remains positive. The domestic demand has been constant for years, and with the explicit promotion of national supply chains by restricting imports, suggests that the future economic development in the U.S. will be positive if you are physically present in the market.

Regardless of the formation of the government after the election, it can be assumed that the economic appeal of the U.S. as a location will continue to increase. In particular, companies that are already involved in the U.S. or are considering doing so could benefit from certain economic policy measures.

Past experience shows that German companies have been able to achieve attractive positions in the market with a sustainable orientation of their US investments. The long-term local presence of investments in the US-market provides independence from the political landscape in Washington.

In the long term, economic conditions in the U.S. as one of the largest and safest economies in the world, remains attractive, including in terms of diversification, innovation, and growth opportunities. Considering previous experience, the continued restriction of free trade and the existing subsidies, a commitment in the U.S. requires constant monitoring, but overall, the opportunities in the American economy for the future clearly prevails.