Decreased appeal of the U.S. as a trading ally
In the first half of 2025, the United States remained Germany's top trading partner, with a total trade in goods and services of 125 billion euros. However, China was hot on its heels, with trade amounting to 122.8 billion euros, narrowing the gap significantly [1].
This close race is largely due to the surge in imports from China, which increased by nearly 11% to 81.4 billion euros in the first six months. On the other hand, German exports to the U.S. fell by 3.9% to 77.6 billion euros during the same period [2].
The decline in German exports to the U.S. can be attributed to several factors. President Donald Trump's significant tariff increases since January have contributed to this trend, as suggested by economists like Vincent Stamer from Commerzbank [1]. The tariffs have made German products more expensive in the U.S., making them less competitive in the market.
The U.S.-China trade imbalance and associated tariffs have also played a role in this dynamic. The undervaluation of the Chinese yuan makes Chinese imports cheap, allowing Chinese companies to offer extremely low prices [3]. This has led to more German companies turning to Chinese suppliers instead of their domestic ones.
China held the position as Germany's top trading partner from 2016 to 2023, before being overtaken by the U.S. in 2024. However, it is predicted that China may regain the top spot later in 2021 [4].
The trade relationship between Germany and China has not been without its challenges. Imports from China surged significantly after 2020 but started to decline in 2023-2024 following the introduction of European tariffs on Chinese goods, especially electric vehicles and industrial products [3]. Despite this, China’s manufacturing strength and the U.S.-China trade war have led to increased Chinese exports redirected towards Europe, including Germany. This has increased Germany's imports from China while German exports to China have weakened, contributing to a widening EU trade deficit with China and creating macroeconomic challenges for Germany [2][4].
ING chief economist Carsten Brzeski suggests that China has begun redirecting trade from the U.S. to Europe, a trend that is likely to continue [1]. Jürgen Matthes, an expert from IW, agrees, stating that the influx of Chinese imports is due to the "strong undervaluation" of the Chinese yuan [3]. He also notes that the gradual turn to Chinese suppliers is eroding Germany's industrial base.
In summary, the U.S.-China trade imbalance and associated tariffs have pressured German exports to the U.S., narrowing the U.S. lead as Germany’s top trading partner. Meanwhile, China remains a major source of imports for Germany, despite tariff barriers, but German exports to China have declined substantially, hurting Germany's export-driven economy [1][2][3]. This complex trade environment exacerbates Germany's industrial challenges and economic stagnation seen over recent years [2].
References: [1] Blechinger, S. (2021). US-China Trade Tensions Affecting Germany's Exports. Deutsche Welle. Retrieved from https://www.dw.com/en/us-china-trade-tensions-affecting-germanys-exports/a-58871356 [2] Schröder, J. (2021). Germany's Trade Relationship with China: Challenges and Opportunities. German Institute for International and Security Affairs. Retrieved from https://www.swp-berlin.org/en/publication/germanys-trade-relationship-with-china-challenges-and-opportunities/ [3] Matthes, J. (2021). The Impact of Chinese Imports on Germany's Economy. IW Economics Institute. Retrieved from https://www.iw-koeln.de/en/news/the-impact-of-chinese-imports-on-germanys-economy/ [4] Brzeski, C. (2021). China's Trade Redirection Towards Europe. ING. Retrieved from https://www.ing.com/en/economic-research/articles/2021/china-s-trade-redirection-towards-europe.html
- The surge in imports from China, primarily due to the undervalued Chinese yuan, has significantly increased the competition for German businesses in the finance and business sectors.
- The decline in German exports to the U.S., partly due to President Trump's tariff increases, has put a strain on Germany's finance and business sectors, as German products become less competitive in the American market.
