Geopolitical reorientation
China is no longer Germany’s most important trading partner
May 9, 2024, 10:34 a.m
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China was Germany’s number one trading partner for eight years. That will change in the first quarter of this year. The trade volume between Germany and China is falling and the relationship between the economies is changing.
China is no longer Germany’s most important trading partner. The USA overtook the People’s Republic in the first quarter, according to calculations by the Reuters news agency based on official data from the Federal Statistical Office. Accordingly, the trade volume with the United States – exports and imports combined – totaled a good 63 billion euros from January to March. The exchange of goods with China was significantly lower at almost 60 billion euros. In 2023, the People’s Republic remained number one for the eighth year in a row with a trade volume of around 253 billion euros – but only a few hundred million euros ahead of the USA.
According to the Cologne Institute of German Economics (IW), there is also a geopolitically motivated reorientation behind this development. “Away from system rival China and towards a transatlantic partner,” said IW expert Jürgen Matthes. This is probably also due to the fact that the Chinese economy is developing worse than many had hoped, while the US economy is actually exceeding expectations.
“German exports to the USA have now continued to rise due to the robust economy in the United States, while both exports to and imports from China have fallen,” said Commerzbank economist Vincent Stamer, explaining the changing of the guard in the first quarter. Structural reasons also slowed down trade between Germany and the People’s Republic.
Moved up the value chain ladder
“China has moved up the value chain ladder and is increasingly producing more complex goods itself that it previously imported from Germany,” said Stamer. “In addition, German companies are increasingly producing locally instead of exporting the goods from Germany to China.” Geopolitical tensions – such as the dispute over Taiwan, which is claimed by Beijing – could further strengthen this trend.
The foreign trade association BGA also sees a change in the ranking of the most important markets. “The extent to which this is sustainable is currently uncertain,” said BGA President Dirk Jandura. “If the administration in the White House changes after the US elections in November and moves more towards market isolation, this process could come to a standstill.” If former US President Donald Trump prevails against incumbent Joe Biden, there could be a threat of new tariffs on European goods, as in the Republican’s first term in office.
The attractiveness of the US market for German companies has been growing for years, said Jandura. This trend has been increasing recently. US President Biden in particular has pushed forward a strong industrial policy since the beginning of his term in office. The USA wanted to improve domestic production of critical technologies, such as batteries for electric vehicles or semiconductors. “This is a massive attraction for our companies and their supply and value chains, even if a free trade agreement between the USA and the EU is still sorely missed,” said Jandura.