German Economy Faces Record Trade Deficit with China, Raising Political Tensions
Calculations from the Institute for Economic Research (IW Köln), published in “Welt am Sonntag” reveal a burgeoning trade deficit between Germany and China poised to reach a record high. Preliminary figures for the first three quarters of 2024 indicate a shortfall of €63.1 billion, mirroring the previous peak recorded in 2022, a figure skewed by a one-time import surge.
The data underscores a concerning trend: German exports to China have dramatically declined, plummeting to €61.4 billion in the first nine months of the year – the lowest level observed in at least seven years. Simultaneously, imports from China have surged to €124.5 billion, widening the gap considerably.
Analysts anticipate this negative trajectory will persist into the fourth quarter, with little prospect of a significant rebound in German exports. Jürgen Matthes, a trade expert at IW Köln, expressed cautious pessimism, stating, “There is barely any hope that exports to China could rise again over a longer period”. This sentiment carries significant political weight, particularly as German industries grapple with heightened competition and concerns about the sustainability of established trade relationships.
Matthes’ assessment has fueled calls for a more assertive policy response from the European Union. He specifically advocates for a more rigorous and comprehensive protection of domestic production and exports, urging the EU to actively counteract what he describes as “Chinese competitive distortions”. This perspective reflects a growing debate within Germany and across Europe regarding the perceived unfairness of trading practices and the potential risks associated with over-reliance on the Chinese market.
The deficit not only highlights the vulnerability of the German economy to fluctuations in the Chinese market but also increases pressure on policymakers to reassess trade strategies and consider potential tariffs or other protective measures. The situation is likely to become a focal point in ongoing discussions about the EU’s broader trade policy with China, potentially intensifying geopolitical tensions and reshaping the economic landscape for both sides. Critics contend that previous approaches have been too lenient, allowing for practices that undermine German industrial competitiveness and jeopardize long-term economic stability.