Germany’s export sector faces a protracted period of challenges extending into 2026, according to a sobering assessment by the Institute for Economic Research (IW), a think tank closely aligned with employer associations. The study, commissioned by the Foreign Office and reported by Handelsblatt, highlights a concerning trend of declining global market share, despite some offsetting factors.
While a complete collapse of overall exports has been averted, the current trajectory indicates a continued erosion of Germany’s position as a leading exporter. Significant declines in shipments to key markets-specifically the United States and China-are proving difficult to compensate for, even with increased exports within Europe. Exports to the US fell by nearly eight percent in the first three quarters of the year compared to the previous year, while those to China experienced a more dramatic twelve percent drop. These declines alone have reportedly suppressed overall German exports by over 1.5 percentage points year-on-year, with the US contributing 0.81 percentage points and China 0.74 percentage points.
The IW’s analysis paints a particularly bleak picture concerning China. The report asserts there is “scarcely any hope” for a sustained rebound in exports to the nation, citing Beijing’s drive towards technological self-sufficiency and its reliance on what are described as “unfair trade practices”. Repeated appeals to China to improve conditions for EU exporters are deemed unlikely to yield significant results.
This assessment is fueling a debate within German and European policy circles regarding the need for protective trade measures. IW economist Jürgen Matthes argues the situation “justifies” safeguarding European industries threatened by Chinese competition through the imposition of trade barriers. Beyond protectionism, the study advocates for stimulating growth through a strengthened intra-European trade framework as a vital driver for German export revival.
Furthermore, the IW emphasizes the urgent need for the EU to prioritize negotiations with the United States to reduce and ultimately eliminate, the elevated tariffs on processed steel and aluminum products. Failure to do so, the report warns, risks further diminishing German exports to the US in the coming year and potentially escalating trade tensions between the two economic powerhouses. The findings underscore a critical juncture for German foreign trade policy, requiring a recalibration of strategy to navigate increasingly complex geopolitical and economic headwinds.
