Overview

Germany is one of the United States’ most significant trading partners and its digital economy is of fundamental importance to Germany’s federal government. Digital technologies influence most aspects of its current trade and security strategies. Germany’s digital economy has seen significant and stable growth over the past years, not being impacted by the economic slowdown found in other sectors. It has grown to be worth over $216 billion in 2023, up from $211 billion in 2021.

During its 2021-2025 mandate, the federal government has stressed the importance of the digital economy in its coalition agreement. Their goal is an increase in investments in numerous aspects of the digital economy, especially in artificial intelligence (AI), quantum computing (QC), and the digitalization of public services. The 2022 Digital Strategy obligates the current federal government to improve several of these aspects by the end of its mandate while also stressing the importance of digitalization within the education system and improving access to select data. A central concept within this strategy is digital sovereignty and how to become more independent in terms of digital technologies from the United States and the People’s Republic of China (PRC). However, Germany’s 2023 International Digital Strategy emphasizes the importance of international cooperation with partners, such as the United States, in achieving its digital ambitions and pursuing the goals of net neutrality and the protection of human rights.

There has also been significant cooperation between the U.S. and Germany in other fields, as can be seen in the 2024 Joint Statement on Cooperation in Quantum Information Science and Technology (QIST), in which both countries committed to intensity collaboration and cooperation.

Germany was ranked 4th of all 27 Member States in terms of connectivity in a 2022 European Union (EU) report (Digital Economy and Society Index). Germany was found to be among the five worst performing countries by level of digitalization of its public services. The report also noted the significant investment the federal government is making to improve its digital economy. A 2024 KfW Study found that Germany is lagging behind other large economies in terms of number of academic publications and patents relating to digital technologies with the trend currently showing no signs of changing.

EU law takes supremacy over national laws and as such most regulations for its digital economy are set at the EU level rather than in Germany.

Market Challenges

Most laws are set at the EU level. The Digital Economy Chapter of our Country Commercial Guide for the European Union provides a more comprehensive overview.

In addition, some legislation is still set at Germany’s national level, including:

• Online Access Act: Enacted in 2017 and amended in 2024, this Act expands the digital services provided by Germany’s public administration. Services for companies should be completely online by 2029.
• NIS2-Umsetzungs- und Cybersicherheitsstärkungsgesetz: Proposed legislation, to translate the EU’s NIS-2 directive into German law. Requires all companies with 50+ employees to invest in cybersecurity measures

In Germany data privacy is taken very seriously and overseen both at the state and federal level. Each state has its own data protection agency, which has jurisdiction over companies and public authorities within the state. At the national level, the Federal Commissioner for Data Protection and Freedom of Information oversees federal public authorities and the telecommunications and postal sector. Overall, EU data privacy is regulated by the EU’s General Data Protection Regulation (GDPR).

A 2022 report by Deutsche Bundesbank, found that 58 percent of all payments in Germany were still conducted with physical currency. This is a high proportion compared to other major economies. However, card payments are on the rise.

Germany was one of the first countries to implement a national strategy for AI in 2018. This strategy was subsequently updated in 2020, and the government is currently working on an additional update. The German government views investment in AI as an essential component to maintain its national security, combat its domestic labor shortage, and maintain its place in the global economy. The Federal Ministry of Education and Research (BMBF) plans to invest  
$1.7 billion in AI during the current legislative period. One of its goals is to enable AI to be “Made in Germany”. AI in Germany is also regulated by the EU’s AI Act.

Digital sovereignty plays a major role in Germany’s 2021 Cyber Security Strategy which is now regulated by the EU’s CRA. The government acknowledges that increasing digitalization as part of the move towards advanced manufacturing (Industry 4.0) also increases the risk and consequences of cyber-attacks. The government will help fund projects and companies that increase the security of SMEs. Other measures Germany has taken to increase its digital sovereignty are its involvement in the Gaia-X project and the EU’s EUCS.

Other barriers to U.S. companies entering Germany’s digital economy might include that many public services are still not available online. However, the government is significantly investing to change this by 2030. In addition, while 96 percent of the country does have fast internet coverage, this is primarily by very high-capacity network (VHCN) and not fiberoptic cables. A notable urban-rural divide still exists when it comes to internet speed.

The United States Trade Representative’s 2024 National Trade Estimate Report on Foreign Trade Barriers outlines additional barriers to U.S. goods and services in Germany, including in areas related to its digital economy.

Digital Market Opportunities

The 2022 gigabit strategy of the federal government calls for more investments in Germany’s fiberoptic networks. It aims to have 50 percent of the country connected by Fiber to the Premises (FTTP) by 2025 and 100 percent by 2030. The strategy includes $12.6 billion in government subsidies and estimates private sector investments by telecommunication companies at $52.6 billion. Communication equipment across the rail network will also be updated as part of the strategy.  

Germany has recently decided to remove Huawei and ZTE equipment from its most critical communications infrastructure. German mobile network operators are required to remove these components from their core 5G networks by 2026. In addition, Germany is among the world leaders in adopting Open Radio Access Network (ORAN) technology, which increases competition due the interoperability of equipment. Deutsche Telekom, O2 Germany (Telefonica), and Vodafone have all already started to deploy ORAN. A fourth operator, 1&1 (United Internet), is currently building out a new network based solely on ORAN technology.

Microsoft and Apple recently announced substantial investments in Germany’s digital economy. The former intends to allocate $3.4 billion until 2026 primarily to build out its data center infrastructure.

Despite concerns about digital sovereignty, U.S. companies remain active in Germany’s quantum computing sector. In 2021, IBM and the Fraunhofer-Gesellschaft have partnered to bring IBM’s Quantum System One to Germany, the first country outside the United States. In the 2024, Germany allocated $2.4 billion to further the U.S.-Germany partnership. It will be used in part to invest in additional U.S. quantum research projects until 2026.

Helpful Resources

• U.S. Department of Commerce, International Trade Administration, Industry & Analysis Office of Digital and Emerging Technology Service (DETS)
• National Trade Estimates Report – Digital Trade Barriers
• White House CET List, e.g., Artificial Intelligence -> Machine Learning
• United States International Cyberspace & Digital Policy Strategy - United States Department of State