That’s one of the topics for my class presentation next week. The answer is quite simple. German and other European camera manufacturers made cameras that were complex and often with leaf shutters. Zeiss has been making optics for over 100 years now and the quality to this day is very good.
But Japanese camera companies started making modular and simple cameras with a focal plane shutter that allowed the parts to be mass produced and the parts interchangeable. During and after the Vietnam war, US servicemen would take their vacations in Japan and buy these cameras, flooding the market.
After that, many people grew up using Canon, Nikon and forgetting to use the complex German systems. Exception has been Leica, but they were and still are expensive, costing many times over what a comparable Japanese camera costs.
Raphael Kruczkowski's Blog 