Germany’s Chancellor Friedrich Merz arrived in Beijing on Wednesday for his first official visit to China, at a moment when German industries are raising urgent concerns over a rapidly widening trade deficit with the world’s second-largest economy.
According to Germany’s Federal Statistics Office, imports from China in 2025 were more than double the value of German goods exported in return — a trend economists describe as a structural threat to Europe’s industrial core.
Before departing Berlin, Merz said Germany wanted a partnership with China that is “balanced, reliable, regulated and fair.”
He is also expected to urge Beijing to use its influence on Moscow to help bring an end to the Russia–Ukraine war, though commercial tensions are poised to dominate the visit.
China regains top spot as Germany’s biggest trade partner — but imbalance grows
China overtook the United States once again in 2025 as Germany’s largest trading partner, but the underlying numbers show a dramatic divergence:
- €170.6 billion in Chinese goods flowed into Germany — up 8.8%
- German exports to China dropped 9.7% to €81.3 billion
Economists warn this is eroding key German sectors:
- Automobiles
- Machinery and engineering
- Chemicals
German industry sounds the alarm
Jürgen Matthes of the German Economic Institute says the imbalance is driven by:
- “Massive” Chinese subsidies
- Artificially low prices
- Alleged currency under-valuation
He warns the situation is “eroding the core of German industry.”
Beijing denies such allegations, saying its subsidy rules are transparent and in line with international trade norms.
A new ‘China shock’ hitting Europe
Analysts are calling the recent surge of cheap Chinese imports the latest “China shock”, driven by:
- Europe’s higher production costs (post-pandemic + Ukraine war)
- China’s deflationary phase caused by over-investment and overcapacity
This is now clashing with Europe’s already uncertain economic environment, intensified by Donald Trump and his renewed U.S. tariff policies.
“No one in Europe wants a two-front trade war with the world’s two biggest economies,” says Noah Barkin of the German Marshall Fund.
Yet Europe holds leverage, Barkin notes, because China urgently needs export destinations for its overcapacity.
Merz faces pressure from German business leaders
Merz is traveling with a large business delegation, and German industry groups are urging him to directly confront:
- Market distortions caused by Chinese state support
- Export controls on rare earths, critical to high-tech manufacturing
- Rising EU dependence on Chinese supply chains
The Federation of German Industries and the German Engineering Federation are calling for Europe to restore “fair competitive conditions” — including defensive trade measures if necessary.
But Merz’s long-standing instinct as a free-trade, pro-transatlantic conservative sits uneasily with today’s geopolitical and economic realities.
Europe divided on how to respond to China
The EU has launched multiple anti-dumping probes against China and is weighing new proposals to boost:
- Domestic European manufacturing
- Strategic independence
- Supply-chain security
But unlike the U.S., the EU cannot impose tariffs as flexibly.
“Classic trade defence tools are difficult for Brussels,” says Barkin.
“Europe is constrained in ways Washington simply isn’t.”
A strategic reset of Germany’s China policy
Merz’s visit underscores Germany’s shift away from its earlier doctrine of “Wandel durch Handel” — change through trade — a strategy associated with former Chancellor Angela Merkel.
Critics long argued that Merkel prioritized economic ties over human rights concerns, leaving Berlin highly dependent on Beijing.
Those deep economic ties cannot be unwound quickly, which is why Merz insists Germany must de-risk, not decouple:
“It would be a mistake for us to seek to decouple ourselves from China,” Merz said before boarding his flight.
His challenge in Beijing will be to defend German industry’s competitiveness while keeping diplomatic space open to manage the war in Ukraine — all without igniting another front in global trade tensions.