In the autumn of last year the German Mittelstand still seemed quite calm about future business relations with the United States. In the meantime, business owners can see the situation more clearly - and US President Donald Trump is advocating his "America First" strategy of economic protectionism, as his recently presented tax plan shows. But nothing with the current US government is set in stone. And the initially harsh tone has become increasingly mild, as the subsequent modifications of the tax plan show.
But what practical consequences will this have for German Mittelstand companies that already have a subsidiary, a branch office or a representative office in the United States or plan to make this kind of investment? Can a German Mittelstand company live with these ups and downs?
"America First" as a driver of investments
The fact is: Apart from the daily Twitter messages from the White House a strong will to increase cooperation is clearly noticeable on both sides of the Atlantic. Companies, associations and organizations are standing together in these politically challenging times. It is true that we can no longer take for granted the things that were a given in the past few decades, such as free trade and free access to resources, capital and labor. But still: right now might actually be a golden age for German Mittelstand companies to invest or expand their activities in the United States. Because when you look at it the other way around, "America First" means that investments in the US are more welcome than ever before. The boundless willingness to cooperate and increase friendly relations between Germany and the United States is an impression that ran like a thread through the countless discussions held by Henning Günther Wind LL.M., a tax advisor, finance graduate and partner at Ebner Stolz, during his visits to the United States, including at a high-caliber "100 Days of Trump" event in New York with mid-sized companies and representatives of associations, chambers and business promotion offices.
German Mittelstand in the United States – Charlotte, NC
On the ground in the United States, the Trump Administration has not caused German Mittelstand companies to lose their confidence. This was confirmed by the impressions gathered in the Charlotte, North Carolina region, where more than 300 Mittelstand companies from the German-speaking countries have set up shop. But now it is time for the litmus test: Can internal procedures at companies be adapted to local requirements so that they operate seamlessly on both sides of the Atlantic? Is it possible to recruit or train a qualified workforce? The administrative capacities at subsidiaries in the United States, particularly at Mittelstand companies are much smaller than at the German headquarters. Synergies often get "lost in translation"—and that can get in the way of growth. It is critical to bring in local expertise so that all resources can work towards a common goal. From the consulting standpoint, our partnership with colleagues in the Nexia network has proven invaluable; specifically in Charlotte we have partnered with CliftonLarsonAllen (CLA).
"Engineered in Germany" but "Made in USA"
While German customers prefer goods that are "Made in Germany" with practically endless possibilities for customization, what American CEOs want is to be able to purchase right away—with immediate delivery. They are willing to put up with fewer features or a lower degree of customization of the ordered goods. What is decisive for them is the service associated with the purchase. This means that a completely different infrastructure is required in the United States (logistics, warehouse and a highly responsive service department) than is customary in Germany. "Engineered in Germany" is popular in the United States, but it still has to be "Made in the USA." There is no way of getting around it: German Mittelstand companies must adapt to local customs with local employees.
And this is where the crux of the matter for an investment lies: even if the investment climate is downright friendly, many Mittelstand companies in the US report that it is very difficult to find a qualified workforce there. And it is difficult to close this gap in an age of restrictive visas and work permits in the United States by bringing in more qualified expat workers, i.e., from the German parent company. Accordingly the issue of education and training was one of the top items on the agenda during Angela Merkel's last trip to the United States. Everything currently indicates that the German training system is to be rolled out across the board in the United States in order to produce the workforce that is so urgently needed.
On-Site Support for US Investments
Overall the bottom line is clear: the United States is open for business. The German-American Community is more than willing to assist newcomers and companies that want to expand their business there, will welcome them with open arms and are happy to share their own experiences with them. Even and especially in times of "America First" there are excellent opportunities to invest in the US or expand operations there.