A shift in global trade dynamics, triggered by escalating trade tensions between the United States and China, is increasingly channeling Chinese exports towards the German market, according to a new analysis released by the Institute for Economic Research (IW). The report highlights a significant diversion of trade flows, raising concerns about potential distortions within key German industries.
Data reveals that US imports from China plummeted by nearly 16% during the first half of 2025, while German imports from China surged by approximately 11% during the same period. This influx has also been accompanied by a near four percent decrease in prices for these imported goods, suggesting a concerted effort by Chinese suppliers to aggressively penetrate the German market through price-based competition.
The diversion is particularly pronounced in product categories previously shipped to the US. In 1,558 specific goods categories where US imports from China have declined, German imports have increased by at least ten percent year-on-year. These categories collectively represent almost 52% of all German imports from China. Worryingly, this trend is most evident in core industrial sectors where Germany traditionally holds an export surplus, with some categories experiencing import increases exceeding 100%.
The surge in imports is strikingly visible within the automotive sector. The import of plug-in hybrid electric vehicles (PHEVs) from China has seen a staggering increase of over 130%, while US imports have effectively collapsed, decreasing by almost 99% in the first half of 2025. The trend extends beyond vehicles, encompassing crucial automotive components; imports of manual gearboxes, for instance, grew by 182% within the same timeframe, contrasting sharply with a decline in US imports. The chemical industry is also witnessing similar anomalies, with imports of polyamides increasing by 100% in Germany, while US imports decreased by nearly 11%.
“The increasing diversion of Chinese exports to Germany is a direct consequence of the US’s efforts to disengage from Chinese trade” explains Jürgen Matthes, an expert at the IW. “This is placing considerable pressure on key German industries, including the already struggling automotive sector”. Matthes emphasizes that China’s advantage stems from substantial state support and a devalued currency, creating unfair competitive advantages and enabling the offer of goods at drastically reduced prices.
He concludes by urging the European Union to implement more robust and comprehensive counter-tariffs to establish a level playing field and mitigate the potential for market disruption and damage to domestic industries. The current situation, Matthes argues, poses a significant challenge to the competitiveness of German businesses and requires decisive action from Brussels.