Trade Imbalance Concerns Raised During Chancellor Merz's Beijing Visit
During his inaugural official visit to Beijing, Germany's Chancellor Friedrich Merz addressed the significant trade imbalance between Germany and China, describing it as "not healthy." Federal statistics indicate that imports from China to Germany were more than twice the value of German exports to China last year.
Merz emphasized his intention to explore ways "to reduce this trade deficit," which he noted had "quadrupled" over the past five years. Additionally, he requested that Beijing leverage its influence with Moscow to facilitate an end to the war in Ukraine.
Despite these diplomatic efforts, the substantial trade gap remained a dominant issue throughout the discussions, which included a large delegation of German business representatives.
China Reclaims Top Trade Partner Status in 2025
In 2025, China once again became Germany's largest trade partner, overtaking the United States. This development underscores a concerning imbalance for Germany, the largest economy within the European Union.
Data from 2025 reveals that goods valued at €170.6 billion (£148.8bn; $200.9bn) were imported from China into Germany, marking an 8.8% increase compared to the previous year. Conversely, German exports to China declined by 9.7%, totaling €81.3 billion.
Impact on German Industry and Economic Analysis
The German Economic Institute (IW) has expressed concern over this trend, warning that it "is eroding the core of German industry, especially in the car, machinery and chemicals sectors." Jürgen Matthes, head of International Economic Policy at IW, attributes these distortions primarily to "massive" Chinese subsidies and currency undervaluation.
"Chinese price advantages cannot just come from more innovation and efficiency," Matthes told the BBC.
China has previously defended its subsidy policies as transparent and fully compliant with international trade regulations. In response to allegations regarding currency manipulation, Beijing has stated its commitment to a floating exchange rate regime based on market supply and demand, while managing it as necessary.
The "China Shock" and Broader Economic Context
The expanding trade deficit affecting Germany and the EU is being referred to as the latest "China shock." Brussels-based economic think tank Bruegel explains that this trend was partly driven by the COVID-19 pandemic and Russia's full-scale invasion of Ukraine, which increased production costs in Europe.
"During the same period, China entered a prolonged deflationary phase, stemming from over-investment in manufacturing, creating the overcapacity we see today," Bruegel noted.
This situation has prompted European leaders to consider strategies to mitigate the impact of inexpensive Chinese goods, especially in light of prior disruptions caused by US President Donald Trump's tariff policies.
"No one in Europe wants a two front trade war with the world's two superpowers," said Noah Barkin, a visiting senior fellow at the German Marshall Fund.
Barkin, who also serves as a senior adviser at the Rhodium Group, highlighted that Europe retains leverage, as China requires markets for its surplus goods amid overcapacity challenges.
Economic Challenges and Industry Concerns in Germany
The influx of Chinese goods has generated significant concern in Germany, traditionally the economic engine of Europe but one that has experienced economic difficulties in recent years. Notably, Germany's automotive industry is undergoing a challenging transition to electric vehicles, a sector dominated by China, resulting in job losses.
German business groups urged Chancellor Merz to address issues such as "distortions" in competition and export controls on critical rare earth elements during his visit. The Federation of German Industries and the German Engineering Federation both called for clear signals and actions to "restore fair competitive conditions" if necessary.
Merz announced that China would purchase up to 120 aircraft from European aerospace leader Airbus during the visit.
Trade Policy and EU Perspectives
Despite his free-trade and trans-Atlanticist stance, Merz's approach faces challenges amid current global realities. Noah Barkin noted:
"France is behind a protect agenda while Germany is more sceptical."
The European Union has initiated multiple anti-dumping cases against China and is considering measures to enhance domestic production and reduce foreign dependencies.
"I think where the Commission struggles is classic trade defence tools like tariffs," Barkin said. "Unlike the US, which can use tariffs much more flexibly."
Strategic Implications and Future Outlook
For Germany, the situation represents another strategic setback for its previous policy of "change through trade" with countries such as China and Russia. Former Chancellor Angela Merkel faced criticism for prioritizing economic ties with Beijing over human rights concerns.
These extensive economic ties and dependencies are complex and not easily reversed.
Before departing Beijing on Tuesday night, Chancellor Merz stated that Germany would continue its broader de-risking strategy but cautioned against complete decoupling from China.
"It would be a mistake for us to seek to decouple ourselves from China," Merz said.
