Economy
Turkish officials, leaders discuss ‘future of finance’ at Turkuvaz summit
Türkiye’s top financial leaders and authorities gathered on Thursday at a major summit to discuss the strategies and prospects of the sector, focusing on topics varying from digitalization and sustainability to participation banking.
The fifth edition of “Future of Finance Summit,” organized by Turkuvaz Media Group, Daily Sabah’s parent company, brought together leading financial institutions, public and private banking executives, and regulatory authorities.
The event welcomed key policymakers, including Vice President Cevdet Yılmaz, Banking Regulation and Supervision Agency (BDDK) President Şahap Kavcıoğlu, Presidential Investment and Finance Office head Ahmet Burak Dağlıoğlu, Capital Markets Board (SPK) President Ibrahim Ömer Gönül, Borsa Istanbul CEO Korkmaz Ergun, as well as banking executives.
Treasury and Finance Minister Mehmet Şimşek was also set to attend a special panel on “money talks” later during the day.
Speaking at the opening of the event, Kavcıoğlu highlighted that a strong financial structure is “the foundation of sustainable growth.”
Banking sector
He stated that recent years have been shaped by global simultaneous challenges. “Our banking sector has been the backbone of this process. With strong capital structures, low non-performing loan ratios and high liquidity, it continues supporting financial stability,” he noted.
Kavcıoğlu also recalled that they released the Strategic Plan for 2025-2028, which is based on three pillars: strengthening trust and stability in financial markets; ensuring an inclusive, competitive and efficient development track; and enhancing institutional capacity for more effective regulation and supervision.
Referring to the steps they have taken in this direction, he noted that they are addressing the digital finance, sustainable finance and participation finance ecosystems together, and that they have bolstered transparency and analytical capacity in retail banking.
Turning to the participation sector, he suggested that participation financial institutions are a complementary and strategic element of their systems, and that they have taken significant steps recently to develop institutional capacity, increase product diversity and expand the ecosystem.
“With the work we have done, we estimate that participation finance will reach its target of 15% sector share, and with the maturation and integration of the ecosystem, it will ultimately reach its target of 25%,” he added.
Digitalization, AI
Dağlıoğlu, for his part, emphasized that digitalization is always one of the most important themes when discussing the future. He noted that the finance sector, starting from banking, is among the most advanced sectors in terms of digitalization in the country.
Türkiye’s digitalization in the financial sector has become a success story that leaves many countries behind, according to Dağlıoğlu. “Achieving this not only in banking but also extending it to insurance and even the traditionally structured capital markets is a great success. We are witnessing a period in which not only large institutional players but also financial technology companies are rapidly shaping and leading the pace of digitalization,” he maintained.
Regarding the near future, he pointed to artificial intelligence.
“Especially in a field like finance, where regulation and data policies are important and strategic decision-making is required, artificial intelligence and its integration into these sectors represent the biggest challenge ahead. I’m confident that, just as in the past, our regulators will make the right decisions and develop the most effective policies to guide the transformation of the finance and banking sectors through artificial intelligence,” he noted.
Dağlıoğlu also pointed to the importance of sustainability and green issues, and while recalling President Recep Tayyip Erdoğan’s calls for “a more just world” on every platform, he referred to participation finance as a crucial component of this call for a more just world.
Financial stability, growth
Moreover, Yılmaz touched upon the global and domestic economic outlook, addressed the role of the finance sector and provided key data such as its active size, the share of lira in total deposits and the exit from the so-called KKM scheme, among others.
Pointing to geopolitical developments and growing protectionism, Yılmaz suggested, “Unfortunately, our world is not going through a good period,” citing its impact on global growth and trade.
He said that global growth rates are becoming more moderate, meanwhile, mentioning that the Turkish economy expanded by an average of 5.4% in the past two decades, which he said was 1.9 percentage points more than the global average.
“Such an achievement over a 23-year average is remarkable. Our per capita national income was around 38% of the EU average. Today it has reached 70%. This is a significant transformation. We expect to reach 72% next year,” he further said.
The vice president also reiterated that the main priority is financial stability and reducing inflation.
“We are pursuing balanced growth without neglecting either growth or employment. By the end of 2025, our per capita national income will exceed $1.5 trillion. If the IMF’s predictions are realized, we will be the 16th-largest economy in the world. For the first time, we will surpass Italy and become the 4th largest economy in Europe,” he noted.
Yılmaz also suggested that the unemployment rate remained in single digits for 30 months, adding that the goal is to lower it to below 8% by the end of the program period, referring to the government’s medium-term program (MTP).
“Our goal is to transform Türkiye into a higher-income economy by preserving the capacity we have built. Türkiye has achieved growth, maintained a strong real economy, and brought its capacity to a certain point. Now, our priority is to reduce inflation and establish stability in financial markets,” he explained.
“However, while doing this, we are implementing a balanced set of policies that do not sacrifice growth and employment. Our main approach is clear: to move Türkiye to the next level by preserving capacity, strengthening employment and ensuring financial stability,” he added.
Elaborating further, Yılmaz mentioned that according to the World Bank’s Atlas methodology, Türkiye was in the lower-middle income group in 2002.
“Today, for the first time, it is on the verge of entering the high-income countries category. This is a significant turning point in our economic history,” he said.
‘Future of Banking’
Following the opening speeches, a panel discussion titled “The Future of Banking” was held, moderated by Alparslan Çakar, the chair of the Turkish Banks Association (TBB) and general manager of state lender Ziraat Bank. Participants in the panel included Osman Arslan, CEO of Halkbank; Kaan Gür, CEO of Akbank; Ömür Tan, CEO of QNB Türkiye; and Recep Baştuğ, CEO of Denizbank.
In his speech, Çakar emphasized the geopolitical risks and other risks, including trade wars and protectionism. “The tariffs and technology restrictions between the U.S. and China that began in 2024 have weakened businesspeople’s ability to plan for the future. And we all see that supply wars are still ongoing,” he noted.
However, he said that the Turkish banking sector has been one of “our strongest pillars supporting growth despite global shocks.”
“Our banking sector, with both its asset and liability structure, has progressed in line with the medium-term program targets,” he noted.
“When we look at precautionary measures from the perspective of monetary policies, the most important issue is, of course, managing this through interest rates,” Halkbank’s Arslan said.
In terms of interest rates, he suggested that they expect a decrease in interest rates next year as well, along with the decrease in inflation.
“However, this does not mean that there will be monetary expansion or that macro-prudential measures will be completely abandoned,” he added.
The remarks came as the Turkish central bank lowered rates by 150 basis points to 38% on Thursday afternoon.
“Along with a decrease in interest rates in monetary policies, another indicator showing tightening monetary policies is the limitation on credit growth, and, at the same time, what we call selective credit policy, meaning that banks, when using credit, will focus on or prioritize areas that will not increase inflation, but will increase production, investment and exports. We do not expect a significant loosening in this set of rules in 2026,” he explained.
“Even if there is a decrease in interest rates, we predict that this necessary credit policy approach, primarily credit restrictions and selective credit policy, will continue in 2026, especially in the first six months.”
Gür stated that as of the end of October, the sector’s return on equity was 25.4%, which he said is approximately 30% when annualized.
He suggested that this is a profitability below inflation, saying: “Therefore, fundamentally, what the banking sector needs to do is to work in an environment where it will achieve a profitability above inflation and make it sustainable.”
Tan, for his part, stated that the stability program, whose main goal has been to combat inflation for the past 2.5 years, is continuing with progress, along with a significant decrease in inflation, from 75% to 31%.
Noting that more resources will be allocated to the real sector in 2026, he also said: “The gradual decrease in interest rates will improve banks’ margins, while digitalization and increased efficiency will support fee and commission income.”
Baştuğ, for his part, said that Turkish banks have been disciplined since the 2000s, underscoring that it is a well-known and transparent sector.
U.S. President Donald Trump is vowing to increase economic pressure on Iran and Treasury Secretary Scott Bessent has said Washington would introduce measures against Tehran “never been seen” as early as this week.
The United States, United Nations and European Union have applied sanctions, implemented trade embargos and frozen assets since the late 1970s over Iran’s nuclear program, human rights violations and support for militant groups.
Since the Iran war began in February, Washington has levied additional maritime, energy and financial sanctions and started a naval blockade.
Data from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) shows the agency has imposed sanctions on more than 1,000 people, vessels and aircraft since Trump began his second term.
Recent measures have targeted Iran’s shadow oil fleet; shipping insurers; entities and people enabling Iran’s acquisition of weapons; and digital exchanges, freezing an estimated $500 billion in Iran-linked cryptocurrency.
Experts say the Trump administration also could try these options.
Sanctions on Chinese ‘teapot’ refiners
Chinese independent refineries known as “teapots” account for a quarter of Chinese refinery capacity. They operate with narrow and sometimes negative profit margins.
China buys more than 80% of Iran’s shipped oil, according to 2025 data from analytics firm Kpler. Independent refiners absorb much of this trade, exposing them to so-called secondary measures that penalize entities helping a primary sanctions target.
Past U.S. sanctions have deterred larger independent refiners from buying Iranian oil. But the independent refineries are somewhat immune since they have little exposure to the U.S. financial system, sanctions experts say.
Sanctions on Chinese banks
OFAC has imposed secondary sanctions on smaller China- and Hong Kong-based entities accused of processing billions of dollars in Iranian oil and helping to fund weapons procurement.
Treasury has warned two larger Chinese banks they could face secondary sanctions if Iranian funds were found moving through their systems, but has stopped short of designating them.
Hitting those two banks, which U.S. officials have not publicly identified, or imposing other sanctions could have a chilling effect on bigger financial institutions, sanctions experts said, although they warned it could also trigger retaliatory actions by Beijing.
Trump administration officials have sought to play down tensions between Washington and Beijing ahead of an expected meeting between Trump and President Xi Jinping later this year.
They worry that China could curtail exports of critical minerals that are essential to advanced technology production at a time when the U.S. and Western allies are still trying to develop their own supplies.
‘Whack-a-mole’
The United States could continue targeting Iranian individuals and entities, as well as others in China and the Gulf, that are helping Tehran evade sanctions to collect revenues for its war effort.
Treasury recently issued sanctions against firms that are springing up to facilitate Iran’s trading of oil revenue for imports. But such measures amount to a “whack-a-mole” approach that has not altered Iran’s behavior, said Brett Erickson, managing principal of Obsidian Risk Advisors, noting that Tehran simply creates new entities to replace them.
Miad Maleki, a sanctions expert with the Foundation for Defense of Democracies, said Bessent was likely signaling a sharpened enforcement push against oil shippers, purchasers and currency exchangers who help Iran pay for its imports.
Further aviation sanctions were also possible, aimed at degrading Iran’s ability to move trade now that the U.S. has blockaded shipping via the Strait of Hormuz, he added.
Land blockade
Some U.S. and Israeli officials have floated the prospect of a land blockade, which would require assistance from Iran’s neighbors: Iraq, Türkiye, Pakistan, Afghanistan, Turkmenistan, Azerbaijan and Armenia.
The Trump administration has varying degrees of closeness with all those countries except Afghanistan, but that border is mountainous and extremely difficult to patrol anyway.
A land blockade could increase pressure on the Iranian people by halting their imports of food, energy and textiles, but experts say such a move would be difficult to execute and might not result in protests or internal pressure.
Secondary tariffs
Trump has repeatedly threatened tariffs on goods from countries that do business with Iran, although the Supreme Court struck down the legal basis for such taxes.
The Senate passed a sweeping Russia sanctions bill last week that included new Iran sanctions and would give Trump new tariff powers that he could potentially use against countries that aid Iran’s commerce and weapons procurement.
That legislation must still pass the U.S. House of Representatives, which could prove challenging given widespread concerns among Democrats and some Republicans about the tariff measures.
Istanbul Airport has set new records for daily flights and passenger traffic, Transport and Infrastructure Minister Abdulkadir Uraloğlu said Monday.
Türkiye’s largest airport and one of the biggest civil aviation hubs in the world handled 1,739 flights and 290,287 passengers on Sunday.
The figures marked the highest number of daily flights and passengers ever recorded at an airport in Türkiye and Europe, Uraloğlu said in a statement.
The passenger count renews Istanbul Airport’s previous peak of 289,732 reported on the same day a week ago.
The new records further strengthen Istanbul Airport’s position as a major international aviation hub, Uraloğlu said.
“Istanbul Airport is among the world’s leading airports with its capacity, strong infrastructure and quality of service,” he noted.
“These new records once again demonstrate that our airport is further strengthening its position as a global transfer hub.”
The gleaming glass-and-steel structure along the Black Sea coast turned into one of the most important transit centers in aviation since it became fully operational in April 2019.
The hub can handle 90 million passengers a year in the current phase. The figure is nothing compared to its potential capacity to serve 200 million after completing all phases.
Istanbul Airport served record-breaking 84.4 million passengers in 2025, making it the second-busiest airport in Europe after Heathrow Airport and the eighth-busiest worldwide. It seeks to reach the 90 million mark this year.
Sabiha Gökçen also sets passenger record
Across the city, Türkiye’s second-largest airport also recorded its highest-ever daily passenger traffic on the same day.
Sabiha Gökçen International Airport said it had handled 180,914 passengers across 958 flights on Sunday.
It said it saw new daily records for international arriving and departing passengers, domestic passenger traffic, total international flights and international departures.
The airport additionally set a record for aircraft served through Passenger Boarding Bridges (PBBs). A total of 218 aircraft used the boarding bridges on Sunday, surpassing the previous daily record of 212.
Hanita Ahmad, executive director of Sabiha Gökçen, said passenger traffic had surpassed 180,000 for the first time, reflecting both strong demand for the airport and its operational capacity.
“As Sabiha Gökçen, we will continue focusing on continuously improving the passenger experience and sustainable growth in line with our vision of becoming a regional transfer hub,” Ahmad said.
Türkiye’s central government budget swung to a deficit in July, but Treasury and Finance Minister Mehmet Şimşek said the government remains on track with its fiscal targets despite the impact of geopolitical developments.
The budget recorded a TL 378.1 billion ($7.89 billion) deficit last month, according to data from the Treasury and Finance Ministry. That follows a TL 114.2 billion surplus in June.
Budget expenditures totaled TL 1.79 trillion, while revenues reached TL 1.41 trillion in July. The primary balance posted a deficit of TL 51.3 billion, while interest payments amounted to TL 326.8 billion.
Despite the monthly deficit, Şimşek said the government was maintaining fiscal discipline and progressing in line with its budget goals.
For the January-July period, the budget registered a deficit of TL 1.32 trillion. Expenditures reached TL 10.52 trillion, compared with revenues of TL 9.20 trillion.
The government recorded a TL 470.1 billion primary surplus during the first seven months of the year, as primary expenditures totaled TL 8.73 trillion.
The primary surplus, an important indicator of the government’s fiscal position excluding interest payments, increased by TL 228 billion from the same period a year earlier, Şimşek said.
Tax revenues also continued to rise. Tax collections increased 30% year-over-year in July to TL nearly 1.24 trillion, while other non-tax general budget revenues rose 18.9% to TL 145.6 billion.
Fiscal policy to support disinflation
Şimşek said fiscal policy was being implemented with the broader disinflation program in mind.
He noted that the government had forgone a significant amount of tax revenue through the sliding-scale tax mechanism on fuel prices to help support the disinflation process. He also said the ongoing rebalancing of domestic demand had affected revenue performance.
“Despite the significant tax revenue forgone under the sliding-scale mechanism to support disinflation and the impact of the rebalancing in domestic demand on revenue performance, we are progressing in line with our budget targets,” Şimşek said.
The minister added that the government had kept its domestic debt rollover ratio at around 87%, taking financing conditions into account.
He said stronger revenue collection and tighter spending discipline had created fiscal space that would be directed toward priority areas while continuing to support the disinflation process.
“With increased effectiveness in our revenue policies and stronger spending discipline, we will continue directing the fiscal space we have created toward priority areas and supporting the disinflation process,” Şimşek said.
Türkiye’s automotive production fell 8% year-over-year in the first seven months of 2026, while exports by volume declined 14%, as weaker passenger car output and fewer working days weighed on the sector, data showed Monday.
But industry officials said the decline partly reflects preparations by automakers to introduce new models and expand capacity, with the impact of those investments expected to become more visible in the final quarter and particularly in 2027.
Automotive Industry Association (OSD) Chair Cengiz Eroldu said some of their members were preparing their production lines for new models and capacity investments.
“When a new product is introduced to a production line, the existing production pace has to be reduced for a certain period. We consider the production loss to be a normal consequence of the transition to new investments,” Eroldu said.
Hyundai, Opel and Peugeot just recently announced new investments and launches of production of new models in Türkiye.
Hyundai on Friday started mass production of its new all-electric IONIQ 3 model at a factory in Türkiye’s northwestern Kocaeli province.
Earlier this month, Opel said it was moving production of its light commercial vehicle model Combo to Türkiye from the third quarter of this year.
In late July, Peugeot announced it would begin producing its Rifter light commercial vehicle in Türkiye beginning in the third quarter.
Production falls as passenger car output weakens
Eroldu, meanwhile, said the sector also lost around five to six working days in the first seven months compared with the same period last year because of public holidays and administrative leave.
Total automotive production reached 767,216 vehicles in January-July, down 8% from a year earlier, the OSD data showed. Passenger car production declined 19% to 424,667 units.
Commercial vehicle production, however, remained more resilient, rising 9%. Within the segment, production increased 16% for midibuses, 15% for light trucks, 8% for buses and 1% for trucks, while minibus production fell 9%.
The industry’s overall capacity utilization rate stood at 62%, with utilization at 63% for light vehicles, 69% for buses and midibuses, 57% for trucks and just 28% for tractors.
Eroldu said the differing performance across vehicle categories was significant.
“Production declines were concentrated mainly on the passenger car side, while we are seeing a more positive trend in light commercial and heavy commercial vehicles,” he said, adding that the sharp decline in tractor production and the more than 50% contraction in the domestic tractor market warranted attention.
New investments expected to lift local production
Despite the production decline, Eroldu said new investments were already beginning to support the share of locally produced vehicles in the domestic market.
The share of domestically produced vehicles in the passenger car market rose to 35% from 29% a year earlier. Locally produced passenger car sales increased 4%, while imported sales fell 19%.
In the light commercial vehicle market, locally produced vehicle sales rose 13%, lifting their share to 23%, while imported sales fell 9%.
Eroldu said the increase in the domestic share was an early indication of the impact of new investments and that the contribution should become more pronounced as production of new models ramps up.
“The positive impact of new models entering production and export programs will become apparent in the final quarter of the year and, more significantly, in 2027,” he said.
Export volumes decline, but revenue remains resilient
Automotive exports fell 14% by volume to 542,401 vehicles during the first seven months, according to the OSD data. About 71% of total production was exported.
Passenger car exports dropped 29% to 255,679 units, while commercial vehicle exports increased 8%. Tractor exports rose 20% to 7,792 units.
Despite the decline in unit exports, export revenue continued to increase. According to Türkiye Exporters Assembly (TIM) data, total automotive exports rose by around 2%-2.6% in dollar terms to approximately $24 billion.
Uludağ Automotive Industry Exporters’ Association data showed passenger car export revenue fell 9% to $6.3 billion, while exports by main manufacturers increased 0.1% and those by suppliers rose 4.5%.
Automotive remained Türkiye’s leading export sector, accounting for 17% of total exports.
Domestic market contracts, but local share increases
The total automotive market shrank 11% year-over-year to 661,249 vehicles in January-July. Passenger-car sales fell 12% to 502,712, while the commercial vehicle market contracted 5%.
Heavy commercial vehicle sales declined 8%, but bus sales rose 23% and midibus sales increased 14%.
Eroldu noted that despite the market contraction, the sector remained significantly above its long-term averages. Compared with the previous 10-year average, the total market was 31% higher, the passenger car market 32% higher, the light commercial market 30% higher and the heavy commercial market 22% higher.
Europe remains key to industry’s outlook
Eroldu said the performance of the domestic market, demand and competitive conditions in Europe, and the implementation of new models would be critical for the remainder of the year.
He expects full-year production and exports to remain somewhat below 2025 levels but relatively close to last year’s performance.
Looking ahead to 2027, the sector will focus on domestic demand, global vehicle demand, China’s competitive pressure, cost pressures, excess capacity and the European Union’s proposed Industrial Acceleration Act (IAA).
Europe accounts for around 70% of Türkiye’s automotive exports, making the outcome of the IAA negotiations particularly important for Turkish manufacturers and suppliers.
“We expect the negotiation process to extend into 2027,” Eroldu said, stressing that Türkiye’s automotive industry is deeply integrated with Europe’s manufacturing, investment and supply chains.
He said the industry wants Türkiye to be treated within the EU framework as a customs union partner and an integral part of the European automotive value chain, covering both vehicle manufacturers and suppliers.
Eroldu also said that reducing cost pressures caused by the gap between exchange rates and inflation, improving exporters’ access to finance and maintaining predictability in the investment environment would be crucial to the industry’s competitiveness in 2027.
Japan’s economy lost momentum in the second quarter and fell short of market forecasts, as subdued household and business spending highlighted the fragility of the recovery as the war in the Middle East darkens the outlook.
However, long-term bond yields hit a three-decade high as investors brushed aside the soft reading as reflecting one-off factors, and focused more on mounting inflationary risks that could prod the Bank of Japan (BOJ) to raise interest rates next month.
Gross domestic product (GDP) rose 1.1% in annualized terms, government data showed on Monday, missing a median market estimate of 2% and below an upwardly revised 1.9% expansion in the previous quarter.
While the data revealed some temporary soft patches in demand, analysts say robust underlying momentum and persistent price pressures are likely to keep the case for imminent interest rate hikes intact.
“Today’s GDP data was a bit weak but the economy is likely to continue recovering moderately,” said Naoki Hattori, chief Japan economist at Mizuho Research Institute. “Given risks of underlying inflation overshooting its target, the BOJ is likely to proceed with a rate hike next month.”
The BOJ is expected to raise rates as soon as September and is said to be considering hiking more aggressively thereafter to avoid being behind the curve on inflation.
The benchmark 10-year Japanese government bond (JGB) yield rose for a sixth straight session on Monday to hit a 30-year high of 2.925%, as investors continued to price in BOJ rate hikes sooner and faster than earlier expected.
Private consumption was the biggest disappointment in the GDP data, falling 0.02% versus market expectations for a 0.5% increase, the first drop in eight quarters.
Analysts said the weakness was due in part to lower school fees households paid thanks to subsidies, which pushed down headline private consumption but lifted government spending.
Capital spending, a key driver of private demand, fell 1.2% in the second quarter, confounding market forecasts for a 0.4% increase. However, capital expenditure, as well as overall preliminary GDP, tend to be revised higher with updated figures.
Exports remained resilient thanks to solid U.S. demand for Japanese hybrid vehicles and sustained global investment in artificial intelligence that supported shipments of semiconductor-related equipment and components.
Net external demand, or exports minus imports, added 0.5 percentage point to growth, largely because imports fell sharply after temporary disruptions to crude oil shipments through the Strait of Hormuz.
“I don’t think the BOJ would be too worried about today’s GDP data as the economy is showing remarkable resilience to headwinds from the Iran war,” said Yoshiki Shinke, senior executive economist at Daiichi Life Research Institute.
The government maintained its sanguine view on the economy.
“The economy remains on a moderate recovery path, with export-driven growth offsetting weakness in domestic demand,” Economy Minister Minoru Kiuchi said in a statement.
Outlook murky
Looking ahead, analysts cautioned that rising import costs and mounting upstream price pressures could eventually feed through to consumers, posing a risk to spending later this year.
Aside from rising fuel costs from the Middle East conflict, a weak yen has lifted import prices and broader cost-of-living for households, posing a headache for policymakers.
Such price pressures have led to a flurry of hawkish comments from BOJ policymakers that bolstered the case for an early rate hike.
The government has sought to cushion the blow to households from rising living costs with subsidies, though rising bond yields may prevent it from ramping up fiscal spending any further, some analysts say.
That spells trouble for consumption, which is mostly holding up so far as a tight job market prods firms to offer higher pay.
“Government subsidies have helped contain consumer inflation so far, but a weaker yen and higher crude oil import costs raise the likelihood of broader price hikes from the autumn onward,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
A survey this month by the Japan Center for Economic Research showed 37 economists forecast annualized GDP growth to slow to an average 0.05% in the July-September quarter.
“The boost to consumption from policy measures is already fading, and inflation will increase in H2 as firms will pass on increased costs, deteriorating consumers’ purchasing power,” Oxford Economics wrote in a research note.
“Although AI-related goods exports will continue to stay robust in the near term, sluggish non-AI related global economic activities will limit overall export gains.”
German companies’ investments in the U.S. have dropped to a three-year low in the first half of 2026, as Trump administration policies continue to raise uncertainty and pose risk for trade between the key trans-Atlantic partners, data shows.
First-half direct investments plunged by nearly two-thirds year-over-year to 4.3 billion euros ($5 billion), the lowest level since 2023, according to calculations by the German Economic Institute (IW), seen by Reuters.
Compared with the same period in 2024, that represents a drop of nearly 80%, said the report, which is based on data from Germany’s central bank.
“This continues the downward trend that has been evident since the start of Donald Trump’s second term in January 2025,” IW researcher Samina Sultan told Reuters.
Since returning to office, Trump has threatened most of the United States’ international trading partners with import tariffs in an attempt to secure concessions favourable to Washington.
In a bid to avoid heavy duties on its exports to the U.S., for example, the European Union agreed a deal last year that included a $600 billion investment pledge.
In the five years before the COVID-19 pandemic, first-half investments by German companies in the U.S. averaged 15.8 billion euros, the data showed, almost four times the 2026 level.
That said, the 2020 to 2023 period was shaped by the “exceptional circumstance” of the pandemic, Sultan said, with some years marked by net investment outflows.
The researchers also examined the composition of investment flows over 2025 and found that both direct-investment loans and reinvested earnings were exceptionally high, while equity capital in the narrower sense – the balance of new investments and liquidations – remained below average.
“Companies that are already active in the United States are therefore continuing to reinvest the profits they earn there in the country,” Sultan said.
“This suggests that the U.S. remains an attractive market overall.”
However, companies were hesitant to commit new capital, she said.
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