China narrows gap with US as Germany's biggest trading partner
'Although the US was able to defend its position as Germany's most important trading partner, the lead over German trade with China is razor-thin,' said Vincent Stamer, economist at Commerzbank. The US had overtaken China as Germany's top trading partner in 2024, ending an eight-year streak for China. The shift came as Germany sought to reduce its reliance on China, with Berlin citing political differences and accusing Beijing of unfair practices.
Trade dynamics shifted again, however, in 2025 with Donald Trump's return to the White House and renewed tariffs. The EU's trade deal with the US in July set tariffs at 15 percent for most products. 'As the year progresses, losses in German exports to the US are likely to continue and even intensify,' said Juergen Matthes, head of international economic policy at the Cologne Institute for Economic Research. German exports to the US fell 3.9 percent to 77.6 billion euros in the first half compared to the same period last year.
Commerzbank expects new US tariffs to slow Germany's exports to the US by 20 percent to 25 percent over the next two years. 'As a result, China is likely to regain the top spot among Germany's trading partners over the course of the year,' Stamer said.
Imports from China surged 10.7 percent year-on-year in the first half, reaching 81.4 billion euros. 'Apparently, German companies and consumers find it difficult to replace Chinese goods,' Stamer said.
The rise may indicate China has begun redirecting trade from the US to Europe, flooding the German and European market with cheaper goods, said Carsten Brzeski, global head of macro at ING. A significant undervaluation of the yuan against the euro is also making Chinese imports cheaper, said Cologne Institute's Matthes. German exports to China fell 14.2 percent to 41.4 billion euros, with exporters struggling amid increased competition from Chinese manufacturers.
The sharp decline in exports to China, combined with surging imports, has led to a record trade deficit of 40 billion euros, second only to 2022. 'All these developments are damaging the German economy and further exacerbating the industrial crisis,' Matthes said. – Reuters
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