_ J.C. Kofner, Chief Economist, MIWI Institute. Munich, 26 May 2025.
The Scale of Deindustrialization and Offshoring of Production
Germany’s once world-renowned industry—long a symbol of technological excellence and economic strength—is facing an existential crisis. Deindustrialization has reached dramatic proportions in recent years, endangering the country’s economic foundation.
According to the Federal Statistical Office (Destatis), the production index in the manufacturing sector was one quarter below the pre-crisis trend from 2013 to 2018 in the first quarter of 2025.[1] Since Angela Merkel took office, Germany has slipped in the Family Business Foundation’s Industrial Location Index from 9th to 17th place out of 22 industrial nations.[2]
According to the Centre for European Economic Research (ZEW), Germany’s economy lost nearly 200,000 companies in 2024—a 16 percent increase from 2023 and the highest number since 2011. Energy-intensive industries were especially affected, with 1,050 plant closures—up 26 percent from the previous year. In the chemical and pharmaceutical sectors, 360 companies ceased operations, the highest number in over two decades. High-tech services such as IT, product development, and environmental engineering saw 13,800 closures in 2024—an increase of 24 percent.[3]
Labour market data confirm the severity of the situation: The Federal Employment Agency reports a loss of 361,000 industrial jobs in the manufacturing sector between May 2019 and February 2025 (seasonally adjusted).[4] A study by EY forecasts a further 100,000 job losses by the end of 2025.[5]
Surveys underscore the trend: According to a 2024 IHK survey, one in four industrial firms and one in two large corporations plan to relocate production abroad.[6] A newer IHK survey from 2025 reveals that 35 percent of firms are investing abroad to cut costs—the highest level since 2008. Half of all firms intend to reduce domestic investments, with the United States gaining in importance due to lower energy prices, less bureaucracy, and trade barriers.[7] The German Association of the Automotive Industry (VDA) reports that 76 percent of suppliers intend to postpone, relocate, or cancel planned investments in Germany.[8] A 2025 BDI survey found that almost one in three large industrial companies have relocated or plan to relocate their R&D departments abroad, with 60 percent citing high costs as the main reason.[9]
According to the Bundesbank, net outflows of direct investment since 2019 have totalled over €683 billion, with at least a quarter going to the United States—driven by lower energy prices and more favourable taxation.[10] The relocation of production facilities abroad, especially to the US, is the clearest indicator of this trend. Specific examples illustrate the crisis: Saxony-based solar firm Meyer Burger closed its Freiberg plant employing around 500 workers and plans to relocate production to the US due to more attractive subsidies and lower energy prices there.[11] Industrial scale manufacturer Bizerba from Balingen announced job cuts due to potential US tariffs and is considering shifting final assembly to the US to bypass trade barriers.[12] Wacker Chemie intends to redirect investments to the US as high energy prices in Germany undermine the viability of existing plants.[13]
Germany’s growing dependence on foreign intermediate goods, particularly semiconductors from Asia, adds to the uncertainty. According to the VDA, the semiconductor shortage will reduce automotive production by 20 percent by 2026, following a 9 percent decline in 2021.[14]
These developments demand a new industrial policy that not only improves general business conditions but also creates targeted incentives for reshoring manufacturing to Germany.
The Need to Improve Germany’s Business Environment
To halt deindustrialization and bring industry back, Germany must first and foremost improve its overall business conditions. A detailed analysis can be found in my study “Securing the Future of Bavaria’s Industrial Base” (2024).[15] The focus lies on four key areas:
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Lower taxes: The high tax burden weakens German firms’ competitiveness. A substantial reduction of all profit-related taxes is essential to make domestic investment attractive.
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Cut bureaucracy: Excessive red tape hampers innovation and business activity. A broad deregulation agenda and simplified permitting processes are urgently needed.
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Lower energy prices: Germany’s energy transition has driven prices to unsustainable levels, pushing companies abroad. Ending the energy transition and returning to affordable energy is vital for industrial survival.
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Secure skilled labour domestically: Labour shortages threaten production. Enhanced support for vocational training and further education within Germany is necessary to reduce dependency on external labour.
These measures are the foundation for reversing the offshoring trend. However, improved framework conditions alone are not sufficient. Targeted incentives for reshoring production facilities are essential. The US offers a compelling example: in addition to attractive structural conditions—low corporate taxes and less regulation—the US is implementing an active industrial policy with subsidies and investment incentives. This combination of favourable business conditions and targeted support programs has achieved measurable success, as the next section shows.
The U.S. Reshoring Policy as a Role Model
The United States, under both Joe Biden and Donald Trump, has shown how modern industrial policy can actively promote the reshoring of production. Programs such as the Inflation Reduction Act (IRA, 2022), the CHIPS and Science Act (2021), and the Infrastructure Investment and Jobs Act (2021) offer targeted incentives and deliver remarkable results.
The IRA allocates $370 billion through 2031 for new technologies and domestic manufacturing promotion.[16] Firms receive tax breaks if they meet domestic content requirements—an incentive that helped motivate Meyer Burger to relocate to the U.S. The CHIPS and Science Act has channelled over $231 billion into semiconductor production since 2021, aiming to establish at least two advanced manufacturing ecosystems by 2030.[17] The Infrastructure Investment and Jobs Act is investing $1.2 trillion in modernizing roads, airports, and ports to improve logistics and supply chains. In addition, Donald Trump plans a protectionist tariff policy to shield domestic manufacturing and further encourage reshoring.[18]
The effectiveness of these measures is evident: U.S. manufacturing construction rose by 86 percent, from $128 billion (2022) to $237 billion (2024).[19] Since 2010, nearly 2 million jobs have been created through reshoring, including 343,304 in 2022 alone.[20] U.S. imports from China dropped by nearly 20 percent between 2022 and 2024.[21]
These figures demonstrate that a combination of attractive business conditions and targeted incentives can sustainably strengthen industry. Reshoring reduces transport costs, shortens delivery times, improves product quality, and creates well-paid jobs, boosting local economies.
Concrete Policy Proposals for the Federal Government
Germany’s federal government must develop a new industrial strategy that, alongside improving business conditions, offers targeted incentives for reshoring manufacturing. The goals are to increase domestic value creation, create jobs, and strengthen economic resilience. The following measures are proposed:
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Establishment of special economic zones and real-world testing labs offering favourable conditions, including:
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Compensation payments: Municipalities that lower their trade tax rate receive financial compensation from federal and state governments.
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“Made in EU” rules: In high-tech procurement, a minimum share of value added must occur within the EU to receive subsidies or public contracts.
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State loans and guarantees: Support for investments in production facilities, infrastructure, and R&D.
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Technology support: Aid for implementing cutting-edge technologies like cobotics, AI, and additive 3D printing to offset foreign cost advantages.
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Fast-track permitting procedures for construction, environmental, and industrial approvals.
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Skilled labour promotion: The federal government should cover reskilling and upskilling costs for workers in reshored plants to strengthen regional labour pools.
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Targeted incentive programs: Support should apply to facilities that operated abroad for at least five years.
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Transparency and evaluation: The government must evaluate the policy’s effectiveness annually and report to the Bundestag.
Funding could come from budgetary savings. The AfD parliamentary group has identified potential annual savings of €106–135 billion, e.g. by cutting expenditures on the energy transition, climate protection, asylum, and development aid.[22] These funds could be redirected to support industry effectively.
Conclusion
Deindustrialization threatens Germany’s economic foundations. The loss of 361,000 jobs since 2019, 200,000 companies, and €683 billion in investment outflows calls for urgent action. The U.S. demonstrates—through the Inflation Reduction Act and 2 million reshored jobs—how a blend of favourable business conditions and targeted incentives works. Germany needs a similar industrial policy: tax cuts, deregulation, cheap energy, domestic skills training, and a reshoring program. Only such a strategy can revitalize the industrial base and secure the country’s economic future.
Sources
[1] Statistisches Bundesamt (2025). Produktionsindikatoren – Industrieproduktion in Deutschland. URL: https://www.destatis.de/DE/Themen/Wirtschaft/Konjunkturindikatoren/Produktion/kpi112.html#248602
[2] Stiftung Familienunternehmen (2025). Länderindex Familienunternehmen. URL: https://www.familienunternehmen.de/media/pages/publikationen/laenderindex-familienunternehmen/32cafd4ce6-1742486618/pdf.pdf
[3] ZEW – Leibniz-Zentrum für Europäische Wirtschaftsforschung (2024). Deutsche Wirtschaft verlor 2024 fast 200.000 Unternehmen. URL: https://www.zew.de/presse/pressearchiv/deutsche-wirtschaft-verlor-2024-fast-200000-unternehmen
[4] Bundesagentur für Arbeit (2025). Beschäftigung sozialversicherungspflichtig nach Wirtschaftszweigen. URL: https://statistik.arbeitsagentur.de/SiteGlobals/Forms/Suche/Einzelheftsuche_Formular.html?nn=15024&r_f=ur_Deutschland&topic_f=beschaeftigung-sozbe-monatsheft-wz
[5] Welt (2023). Deutsche Industrie wird bis Ende 2025 wahrscheinlich 100.000 weitere Arbeitsplätze streichen. URL: https://www.welt.de/wirtschaft/article255545262/Deutsche-Industrie-wird-bis-Ende-2025-wahrscheinlich-100-000-weitere-Arbeitsplaetze-streichen.html
[6] DIHK – Deutscher Industrie- und Handelskammertag (2024). Auswertung Energiewende-Barometer 2024. URL: https://www.dihk.de/resource/blob/120386/1681c61b9a91ad07af50f85f0ff77bcb/auswertung-energiewende-barometer-2024-data.pdf
[7] Deutscher Industrie- und Handelskammertag (DIHK) (2025). Industrie verlagert Investitionen ins Ausland. URL: https://www.dihk.de/de/themen-und-positionen/internationales/industrie-verlagert-investitionen-ins-ausland-129670
[8] ZEIT (2025). Automobilbranche: Autozulieferer halten sich mit Investitionen zurück. URL: https://www.zeit.de/wirtschaft/unternehmen/2025-05/automobielindustrie-zulieferer-studie-vda-investitionen
[9] Bundesverband der Deutschen Industrie e.V. (2025). Unternehmensumfrage zum Innovationsstandort Deutschland: Abwanderung von Forschung und Entwicklung bedroht Wertschöpfung der Zukunft. URL: https://bdi.eu/artikel/news/unternehmensumfrage-zum-innovationsstandort-deutschland-abwanderung-von-forschung-und-entwicklung-bedroht-wertschoepfung-der-zukunft
[10] Deutsche Bundesbank (2025). Zahlungsbilanzstatistik – Datenstand 13. Mai 2025. URL: https://www.bundesbank.de/resource/blob/958142/242d2bf7f99efa865c01304a6caa6644/472B63F073F071307366337C94F8C870/2025-05-20-08-59-08-zahlungsbilanzstatistik-data.pdf
[11] MDR (2024). Immer mehr Unternehmen erwägen Verlagerung ins Ausland. URL: https://www.mdr.de/nachrichten/deutschland/wirtschaft/unternehmen-verlagerung-ausland-umfrage-energiewende-barometer-100.html
[12] Merkur (2025). Deutscher Weltmarktführer könnte wegen Trump-Zöllen Produktion in die USA verlagern. URL: https://www.merkur.de/wirtschaft/in-die-usa-verlagern-deutscher-weltmarktfuehrer-koennte-wegen-trumps-zoellen-produktion-93673164.html
[13] n-tv (2023). Wacker Chemie denkt über US-Investment nach. URL: https://www.n-tv.de/wirtschaft/der_boersen_tag/Wacker-Chemie-denkt-ueber-US-Investment-nach-article24044087.htmln-tv+4
[14] VDA (2023). Studie: Bis 2026 drohen wegen Halbleitermangel 20 Prozent weniger produzierte Fahrzeuge. Verband der Automobilindustrie. URL: https://www.vda.de/de/presse/Pressemeldungen/2023/230126_PM_Studie_Bis_2026_drohen_wegen_Halbleitermangel_weltweit-20-Prozent_weniger_produzierte_Fahrzeuge
[15] Kofner, J.C. (2024). Sicherung der Zukunft des Industriestandorts Bayern. MIWI Institut. URL: https://kofner.de/sicherung-der-zukunft-des-industriestandorts-bayern/
[16] Moser H. (2022). Government initiatives spurring reshoring. American Foundry Society. URL: https://www.castingsource.com/column/2022/07/21/government-initiatives-spurring-reshoring
[17] Moser H. (2022).
[18] DiPlacido, M.A. (2025). A New Trade Paradigm. American Compass. URL: https://americancompass.org/a-new-trade-paradigm/
[19] Schoenbaechler B. (2024) The return of manufacturing: North America’s reshoring movement. FTI Consulting. URL: https://www.fticonsulting.com/insights/articles/return-manufacturing-north-americas-reshoring-movement
[20] Moser H., Kelly M. (2022). 2022 Data Report. Reshoring Initiative. URL: https://reshorenow.org/content/pdf/2022_Data_Report.pdf
[21] US Census Bureau, US Department of Commerce. (2025). Volume of U.S. imports of trade goods from China from 1985 to 2024 (in billion U.S. dollars). URL: https://www.statista.com/statistics/187675/volume-of-us-imports-of-trade-goods-from-china-since-1985/
[22] Kofner J. (2024). AfD-Steuerpläne: Studien bestätigen Finanzierbarkeit – diese Schichten werden entlastet. Freilich Magazin, MIWI Institut. URL: https://www.freilich-magazin.com/wirtschaft/afd-steuerplaene-studien-bestaetigen-finanzierbarkeit-diese-schichten-werden-entlastet | Boehringer P. (2024). Einzig die AfD-Fraktion legt einen verfassungskonformen Alternativhaushalt vor. AfD-Bundestagsfraktion. URL: https://afdbundestag.de/peter-boehringer-einzig-die-afd-fraktion-legt-einen-verfassungskonformen-alternativhaushalt-vor/ | König, J. (2024). AfD-Steuerrechner. AfD Bundestagsfraktion. URL: https://joernkoenig.de/afd-steuerrechner/