China has overtaken the United States to become Germany’s largest trading partner once again, underscoring how renewed U.S. tariffs and shifting global supply dynamics are reshaping the economic relationship between Europe’s biggest economy and its top export markets.
Preliminary data from Germany’s statistics office showed that total trade between Germany and China reached €163.4 billion ($190.7 billion) from January to August 2025, narrowly surpassing €162.8 billion in trade with the United States. The figures, calculated by Reuters, reveal how rising protectionism under President Donald Trump’s second administration has reversed last year’s trend, when the U.S. temporarily displaced China after eight years of Chinese dominance in German trade.
The latest shift comes despite Berlin’s stated efforts to reduce its economic dependence on Beijing amid political frictions and concerns about unfair trade practices. The data, however, suggest that Germany’s diversification efforts have run into the hard realities of global demand and industrial interdependence.
Tariffs Take a Toll on German Exports
U.S. tariffs have played a central role in the latest reversal. German exports to the United States fell 7.4% in the first eight months of 2025 to €99.6 billion, a sharp decline that worsened as the year progressed. In August alone, exports to the U.S. dropped 23.5% year-on-year, signaling that the impact of trade barriers is accelerating.
“There is no question that U.S. tariff and trade policy is an important reason for the decline in sales,” said Dirk Jandura, president of the BGA foreign trade association.
Jandura explained that U.S. demand for Germany’s signature export products—automobiles, machinery, and chemical goods—has weakened significantly. These categories, long pillars of German industry, are among those hit hardest by new American tariffs targeting vehicles and industrial components.
The Trump administration’s latest trade measures, introduced earlier this year, were aimed at narrowing the U.S. trade deficit and protecting domestic manufacturers. But for Germany, which relies on the U.S. as its second-largest export destination, the measures have cut deep.
Carsten Brzeski, global head of macro at ING, said that the combination of tariffs and a stronger euro had dealt a double blow to German exporters.
“With the ongoing tariff threat and the stronger euro, German exports to the U.S. are unlikely to rebound any time soon,” he said.
Germany’s export-driven economy is particularly sensitive to global policy shifts. Automakers such as Volkswagen, BMW, and Mercedes-Benz have large production bases in the United States but still depend heavily on transatlantic trade flows. Machinery and equipment manufacturers—another key sector—also face headwinds as American companies source more domestically to avoid import penalties.
While exports to the United States fell, Germany’s trade relationship with China followed a more complex pattern. Exports to China dropped even more steeply than those to the U.S.—down 13.5% year-on-year to €54.7 billion in the first eight months of 2025. However, this was more than offset by a surge in imports from China, which rose 8.3% to €108.8 billion.
This import boom pushed the overall trade balance in China’s favor and reestablished Beijing as Berlin’s top trading partner, continuing a trend of structural dependence that German policymakers have struggled to unwind.
“The renewed import boom from China is worrying,” said Brzeski, noting that “data shows that these imports come at dumping prices.”
Economists have linked the surge in Chinese imports to aggressive pricing in key sectors such as electric vehicles, solar technology, and consumer electronics. These low-cost goods have gained significant market share in Europe, challenging local producers and raising fears of deindustrialization in Germany’s manufacturing heartland.
Brzeski warned that such trends “not only increased German dependence on China but could add to stress in key industries where China has become a major rival.”
The concerns echo similar warnings from European Union officials, who have launched investigations into alleged Chinese dumping practices in the electric vehicle market. The European Commission has accused Chinese automakers of benefiting from heavy state subsidies that allow them to undercut European competitors, a charge Beijing has denied.
For Germany, which remains the EU’s largest importer of Chinese goods, these developments present a policy dilemma. Berlin has been vocal about the need for “de-risking” from China—a term Chancellor Olaf Scholz’s government uses to describe reducing economic exposure without outright decoupling. Yet, as the new data show, German industry continues to rely heavily on Chinese components and intermediate goods.
Repercussions for Berlin
The return of China as Germany’s top trading partner points to how geopolitical and economic forces are pulling Berlin in opposing directions. On the one hand, the government has urged companies to diversify supply chains and reduce dependence on authoritarian regimes. On the other hand, the structural integration of the two economies—especially in automotive and machinery sectors—makes any sudden decoupling costly and complex.
The imbalance between imports and exports also raises questions about competitiveness. Germany’s exports to China have been declining amid slowing Chinese growth and increased local competition. Meanwhile, Chinese companies have deepened their footprint in Europe, expanding exports in high-value segments such as green energy and advanced manufacturing.
Economist Salomon Fiedler of Berenberg Bank said the shifts highlight Germany’s growing vulnerability to external shocks.
“In the absence of economic dynamism at home, some in Germany may now be troubled by any shifts on world markets,” he observed.
Fiedler’s remarks point to a broader malaise in the German economy, which has been stagnating under weak domestic investment, rising energy costs, and subdued consumer demand. The latest trade figures thus expose not just a change in trading partners but a structural imbalance that could constrain Germany’s growth for years.
A Shifting Global Trade Order
The developments also mirror a wider reordering of global trade ties in 2025. As Washington doubles down on tariffs and industrial policy, and Beijing continues to expand its export dominance, Europe finds itself navigating between two rival powers.
For Germany, once the undisputed export powerhouse of Europe, the growing trade friction with the United States and rising dependence on China represent a narrowing strategic corridor. The country’s export sector—long the engine of its prosperity—now faces mounting pressure to adapt to a multipolar world defined by protectionism, currency fluctuations, and technological rivalry.
Germany’s trade policy is expected to be a central issue in upcoming EU economic strategy discussions. Analysts say Berlin’s challenge will be to strike a balance between safeguarding its industrial base and aligning with broader Western efforts to limit reliance on Chinese supply chains.
As Brzeski warned, the data show that “the renewed import boom from China” could deepen Germany’s vulnerabilities if unchecked. At the same time, with U.S. tariffs showing no sign of easing, the country’s traditional export model appears to be under its greatest strain in years.
What began as a statistical shift in trade tables now reflects a deeper structural reality: Germany’s economic compass, long anchored between Washington and Beijing, is once again swinging toward China — even as the political winds in Berlin blow the other way.
