Siemens was not drawn to the U.S. by the threat of tariffs, but by the promise of America.
Germany still limps along.
German factory orders fell in January by the most in a year, a poor start to a quarter when Europe’s largest economy may have struggled to achieve any growth at all.
Demand decreased 7% from the previous month, a far bigger drop than any economist predicted in a Bloomberg survey. A significant decline in orders for machines and vehicles such as ships and planes drove the weakness. Without large-scale orders, it slipped by 2.7%, the statistics office said.
Germany’s economy shrank in both 2023 and 2024, and there are plenty of other dismal statistics to pick from, from a 20 percent slump in production in energy-intensive sectors since 2017 to a 10 percent decline in private investment since 2019.
Any economic growth this year will depend on the stimulus that may be coming from sharply increased spending on defense and infrastructure.
Among the causes of Germany’s economic woes are over-regulation, an increasingly toxic dependency on Chinese business, a deeply troubled auto sector, and high energy costs that owe a great deal, directly or indirectly, to climate policy and a superstitious fear of nuclear power.
Climate policy does not make it onto Bloomberg’s list of explanations for Germany’s plight (how strange), although concern over President Trump’s tariff policies does. The latter may have been a factor, but not one that mattered, I suspect, too much in January.
Meanwhile, via the AP:
Siemens plans to invest $285 million in manufacturing in the United States . . . including two new facilities in California and Texas.
The U.S. is the largest market for the company. The recent investments in Siemens’ U.S. manufacturing footprint and the planned acquisition of Altair, a Michigan-based software company, mark more than $10 billion in investment in the U.S.
“We believe in the innovation and strength of America’s industry. That’s why Siemens has invested over $90 billion in the country in the last 20 years. This year’s investment will bring this number to over $100 billion,” Roland Busch, president and CEO of Siemens AG, said in a statement. “We are bringing more jobs, more technology and a boost to America’s AI capabilities.”
A Fox Business sub-headline read as follows:
Siemens AG CEO: Our US buildout helps mitigate tariff threat for US
That theme was echoed on X by Roger Marshall, a Republican senator from Kansas, who posted the AP story together with the comment that “the Trump Effect continues,” although there is no reference to Trump or tariffs in AP’s account.
Filmed by Fox against footage of a new facility that must have been planned well before Trump’s election, Siemens’s CEO acknowledges that his company’s investment in the U.S. mitigates some of the threat posed by tariffs. But that’s only a happy coincidence. Siemens has a large presence in the U.S., which it has been building up for years, a reflection of the opportunities it sees here.
Siemens is not so upbeat about Germany. Its global head of tax was quoted in a Bloomberg story in October telling German lawmakers that there was “actually nothing that speaks in favor of investing in Germany . . . there’s no growth in Germany — there is growth in other countries — and the tax situation isn’t particularly good either . . . That’s why our most recent investments primarily were made abroad.”
Commenting on those remarks a few weeks later, I noted that
[Siemens] had recently agreed a $10 billion deal to buy Altair, a software company based in Michigan, its largest ever acquisition. The runner-up was from 2015, a $7.5 billion purchase of an oil-and-gas equipment maker based in, yes, the U.S.
To maintain, therefore, that Siemens’s latest U.S. investment helps vindicate Trump’s protectionism is a stretch (even if, as the company’s CEO acknowledges, tariffs might weigh more in future). Nevertheless, such arguments may well become regular GOP talking points. The Washington Post’s Jeff Stein recently quoted Newt Gingrich:
[Trump is] increasingly convinced of the [President] McKinley Model: High tariffs lead to massive capital investments in the U.S., leading to high-paying jobs . . . I assume this will be a two-three-year transition where we’ll all have to adjust.
The basis for Gingrich’s claim that this transition would take two to three years is anyone’s guess. As for high tariffs being responsible for America’s emergence as a major industrial power in the late 19th and early 20th centuries, well, they weren’t. In some respects, they may even have been counterproductive. What attracted investment and (in between slumps) fueled the country’s growth were its enormous natural resources, dramatic technological advance, a reliable legal system, tolerably stable politics, limited government, well-functioning capital markets (in between financial panics), and the cheap labor of millions of immigrants looking for a better life in the land of opportunity.
Times change. It’s no longer the 1980s, but it’s not the 1890s either. Siemens was not drawn to the U.S. by the threat of tariffs, but by the promise of America.
There’s a lesson there.