German Industry Sees Hope with Rising Foreign Orders Amid Climate and Competitive Challenges

German industry is showing signs of recovery in 2026, buoyed by an increase in foreign orders, particularly from outside Europe. According to the VDMA, orders rose by 5% overall in the first half of the year, with a striking 16% increase abroad, though orders within Europe and Germany declined by 8% and 2% respectively. This uptick is encouraging experts like Florian Scholl of the VDMA and Jürgen Matthes of the IW to anticipate a resurgence in domestic production and investment.

Companies such as Paul Horn GmbH report that their international focus, especially in markets like the US, is helping to secure jobs despite widespread layoffs elsewhere. However, German industry still grapples with formidable challenges. Competition from low-priced Chinese imports, supported by subsidies and currency undervaluation, pressures local manufacturers. Matthes has called for countervailing duties to maintain fair competition.

Moreover, climate change impacts logistics critically; companies along the Rhine face rising costs due to low water levels, which disrupt supply chains. Many medium-sized enterprises struggle to adapt proactively to water scarcity and related disruptions, underscoring the urgency for robust climate protection policies.

High labor costs and bureaucratic hurdles tied to Germany's energy transition further complicate the competitive landscape. Both experts emphasize the necessity of government reforms to enhance competitiveness and stimulate investment, signaling ongoing debate on how best to support German industry amid evolving global and environmental conditions.