According to a study by the Institute of the German Economy (IW), the trade deficit of Germany with China is projected to surpass €100 billion for the first time in 2026. This indicates that the deficit has swelled more than sevenfold since 2019, striking at the industrial core of Germany, a phenomenon the IW describes as “China Shock 2.0.”
The shift in trade is particularly evident in the first half of 2026, during which Germany imported nearly two and a half times the volume of goods from China compared to what it exported there. Three bedrock sectors-the automotive industry, electronics, and mechanical engineering-are especially hard hit by this growing imbalance.
IW foreign trade expert Jürgen Matthes notes that this transformation in China trade touches the very pillars of German industry. While China’s own technological advancement plays a role, Matthes emphasizes that systemic distortions-such as generous state subsidies and the use of an undervalued currency-are significant contributing factors. He urged the European Council to pressure the Commission into promptly developing a new trade policy tool designed to establish fair competitive conditions globally.
