Germany is recalibrating its economic and diplomatic strategies in response to escalating trade tensions, particularly those initiated by the United States. As the global economic landscape shifts, Berlin is actively seeking to strengthen partnerships, most notably with China, to mitigate the impact of U.S. Tariffs and safeguard its economic interests.
The changes are already visible in Germany’s trade balance. According to data released by the Federal Statistical Office, China surpassed the United States as Germany’s largest trading partner in 2025, with a total trade volume of €251.8 billion. However, this increase in trade volume is not without its complexities. Imports from China grew by 8.8 percent, reaching €170.6 billion, more than double the value of exports to China, which decreased by 9.7 percent to €81.3 billion. This resulted in a trade deficit of €89.3 billion with China, an increase of over €20 billion.
The surge in Chinese exports includes key sectors such as electronics, optics, and machinery. Simultaneously, the U.S. Market is becoming more challenging for German exporters, with exports declining by 9.4 percent to €146.2 billion, despite the United States remaining Germany’s largest single export market. A significant decrease of 17.8 percent was recorded in the export of automobiles and automotive parts.
While exports to the U.S. Are declining, U.S. Producers have increased their exports to Germany, benefiting from easier access to the EU market. The U.S. Accounted for a trade volume of €240.5 billion, making it Germany’s second-largest trading partner, ahead of the Netherlands (€209.1 billion, a 3.3 percent increase).
The situation is further complicated by the broader trend of increasing trade barriers and the competitive pressures faced by German companies. Sebastian Dullien, an economist at the Hans Böckler Foundation, notes that trade restrictions imposed by the U.S. On Chinese goods are being redirected to Europe, increasing competitive pressure on German businesses across all markets. He argues that China is actively pursuing a strategy to become a global market leader in key industries.
“Protectionism there, structural imbalance here – that’s not a comfortable environment for an export-oriented nation,” stated Dirk Jandura, President of the German Association of Wholesale, Foreign Trade and Associations (BGA). “Our exports to China are declining significantly. This is not a cyclical blip, it’s a warning signal.” Jandura emphasized the need for Germany to address its own shortcomings, diversify supply chains, explore new markets, and enhance its competitiveness.
In anticipation of an upcoming visit to China, Chancellor Friedrich Merz has received a comprehensive list of requests from the German mechanical engineering association (VDMA). The VDMA is urging Merz to emphasize the importance of fair competition and call on China to address issues such as state subsidies, non-tariff barriers, and unequal access to public procurement contracts. The association also seeks an end to export controls on rare earth elements and a fairer valuation of the Chinese currency.
Adding to the challenges faced by German exporters is the strengthening Euro, which makes German goods more expensive on the global market. The Euro recently surpassed 1.20 U.S. Dollars for the first time since 2021, driven by a weakening of confidence in the U.S. Dollar due to the unpredictable policies of the U.S. Administration. This situation, while potentially benefiting U.S. Exporters, creates headwinds for German businesses.
Carsten Klude, chief economist at M.M.Warburg & CO, warned that the conditions are becoming increasingly difficult for Germany’s export-oriented industry. “A too-strong Euro in a fragile global environment is the last thing the economy needs right now.”
Despite the difficulties in key markets, German exports still received a boost from the European single market, with exports to the EU increasing by 3.4 percent in 2025. Dullien points to the increasing public investments through Germany’s special infrastructure and climate funds, as well as the European Commission’s industrial policy initiatives, as positive developments. However, he stresses that a sustained economic recovery in Germany will require a boost in private consumption.
The German economic sentiment rebounded in January , reaching a four-year high, defying expectations given the ongoing tariff threats from the U.S. The ZEW Economic Sentiment Index jumped to 59.6 points, its highest reading since mid-. This positive trend was particularly pronounced in export-oriented sectors, suggesting growing optimism that could mark a turning point for the German economy.
