Trump's tax policy - impact on German investors

We discuss the tax implications of the Trump administration's “America First” strategy for German companies in the US and whether they might even be able to use them to their advantage with Chris Knipp, one of the leaders of the German Practice at RSM US.

Chris, before we turn to German investors, a general question. What is the current mood in the country? How is the American economy responding to the economic policy executive orders issued by Trump? Is he only met with approval or are there also concerns?

As expected, the mood in the US remains divided. While some companies welcome Trump's economic policy measures – in particular, tax relief and deregulation – there are also considerable concerns. The new tariffs and their impact on global supply chains, inflation, and economic development are the subject of particularly heated debate. Many companies are adopting a wait-and-see approach, as the political dynamic can change quickly and it is still unclear how far-reaching the measures will be.

At the same time, many companies are focusing on national economic conditions. The announced tax breaks could encourage investment, but uncertainty about long-term trade policy and possible retaliation from other countries is affecting the strategic planning of many companies.

Now to German investors. We spoke to you shortly after the US presidential election in November 2024 about German investors' reaction to Donald Trump's election as the new US president. What is the current mood among your German clients - have their economic expectations changed since November 2024?

Unsurprisingly, companies are interested in planning security and are therefore somewhat “annoyed” by the political fluctuations and the back and forth with Trump's tariffs. However, the initial uncertainty after the election has now turned into a mixture of caution and pragmatism. While some companies have already made strategic adjustments, others continue to monitor developments closely.

The general expectation is that, under Trump, economic conditions will be business-friendly but also unpredictable. Nevertheless, the overall mood remains positive. This is in line with the results of the 2025 German American Business Outlook, which was recently published by the German American Chambers of Commerce. According to the study, 84 % of German subsidiaries in the US plan to increase their investments in the next three years, and 95 % of the companies surveyed expect economic growth in the US, with 37 % forecasting strong or very strong growth. This optimism underscores the continued confidence of German companies in the US market.

Now, Donald Trump has made good on his promises and introduced new (punitive) tariffs immediately after his inauguration. For many medium-sized companies in Germany, this is precisely the central issue when it comes to trade with the USA. How are your clients reacting to the measures?

This is currently the number one topic in our consulting practice as well. In particular, medium-sized companies that depend heavily on transatlantic trade are concerned about the new trade barriers. In many cases, there are also supply relationships with Mexico, which further increases the complexity. Unfortunately, the current administration is not making it easy for us to make specific recommendations. In this situation, however, we are trying to support our clients in doing their homework by helping them analyze their existing data and supply chains, identify affected products, and simulate the specific impact of possible tariff adjustments. We also advise on which countermeasures can be taken depending on their design.

Many companies with production facilities in the US are also looking at how they can benefit from the current situation – for example, by acquiring new customers that were previously served by competitors or by investing further in US locations. True to the motto: every crisis also presents an opportunity.

Some companies that are already prepared for such scenarios have adapted more quickly in line with their preparations, while others continue to monitor developments closely and weigh up their next steps.

In addition to imposing tariffs, Donald Trump has also issued the first executive orders on the new US tax policy and, among other things, announced the country's withdrawal from the Global Minimum Tax. Can you give us an initial assessment of this?

The announced withdrawal from the global minimum tax is a clear signal that the US wants to pursue a more independent tax policy. However, it is not entirely correct to formulate this as a withdrawal, since the US under the Biden administration has already participated in the design of the global minimum tax, but the corresponding legislative proposals were never passed by the US Congress. It is a thorn in the side of the Trump administration to grant countries extraterritorial sovereign rights over US companies – for example, through the so-called top-up tax. There are also fears that the agreement could restrict US tax policy. One example of this is tax breaks, such as research and development expense credits, that allow US companies to achieve effective tax rates of less than 15 %. These could conflict with the global minimum tax. It is currently unclear whether and how the Trump administration will ultimately position itself on this. However, the matter is highly complex in the context of the US's international tax laws. I therefore strongly recommend that companies address planning and potential tax implications at an early stage, especially if they operate across borders. It may make sense to review and, if necessary, adjust existing tax structures and strategies to be able to react flexibly to potential changes in US tax policy.

In light of this, what tax challenges do you see for German companies operating in the US in the coming months?

The US tax landscape will continue to change. Republican lawmakers took important procedural steps in the last week of February toward tax legislation that is expected to be signed into law this year. The Senate and House of Representatives have each passed a budget resolution, although there are still significant differences between them. These must now be reconciled to advance legislation with a simple majority in the Senate.

Although the budget resolutions passed do not contain any specific tax policy measures, they do highlight the urgent need for companies to prepare for tax legislation that will address the expiring provisions of the Tax Cuts and Jobs Act (TCJA) and other tax issues. The focus is likely to be on issues such as corporate financing, tax incentives, and adjustments in the area of international taxation.

For German companies operating in the US, this means that they will have to devote more attention to possible changes in tax policy. New regulations on tax incentives, such as the aforementioned research and development subsidies or international tax treaties, could come up for discussion. Companies should therefore regularly review their tax structure and prepare for adjustments to benefit from potential tax breaks or minimize risks.

One way to adapt strategically and remain competitive could be to relocate or expand production capacity to the US. Are you currently seeing an increased need for advice from your clients in this regard?

Absolutely. Many German companies, particularly in the automotive, mechanical engineering, and chemical industries, are looking very closely at whether it makes economic sense to relocate production to the US. This is not only an issue because of tariffs, but also because of the tax incentives and strategic advantages that a stronger US presence can offer.

Despite the changed framework conditions, the US market remains huge and companies are increasingly recognizing that proximity to customers and the ability to deliver quickly are important competitive advantages. This applies not only to large companies, such as Porsche and Audi, which according to reports in the financial press may want to transfer production capacity to the US for the first time, but also to medium-sized companies.

In our discussions, we have found that many of our clients are increasingly looking for location analyses and tax optimization opportunities to position their US activities in the best possible economic and strategic way. In this context, not only tax incentives but also logistics and market conditions play a central role. Companies are examining how an increased presence in the US, not least due to the increasing tariffs on imports, can help them respond more quickly to market needs and remain competitive in the long term.

Now, there are always two sides to every coin: does Trump's protectionist tax policy also offer opportunities for German companies, and if so, which industries should now take a closer look at the US market?

Yes, especially for companies that are investing in the US or are already operating there. Industries such as renewable energies, technology, and pharmaceuticals could benefit from tax incentives and reduced regulatory hurdles.

Companies that are part of the local US value chain could also secure competitive advantages. Trump is strongly committed to “Made in USA”, which means that companies with production or significant value creation in the USA could have a better chance of winning government contracts or funding.

It remains to be seen how the tax environment will develop, but companies with a long-term US strategy could certainly benefit. In particular, the mechanical engineering and automotive sectors could benefit from tax incentives for domestic production, while technology-oriented companies could benefit from easier access to capital in the US.

Dear Chris, thank you very much for the exciting insights!

Note: For more insights into the current tax and customs policy of the US government under Donald Trump and its implications for German companies, please join our webinar on April 29, 2025, at 2 p.m. (CEST), with Eva Rehberg, Partner at RSM Ebner Stolz, and Chris Knipp, Partner at RSM US. You are welcome to register for this free, one-hour webinar here.