A new study from the Institute of German Economics (IW) reveals a significant shift in Germany’s trade relationship with China during the first five months of 2025. Exports to China have decreased by approximately 14 percent, while imports from China have risen by roughly 10 percent. This dynamic has effectively transformed China from a perceived growth market for German exports into a situation where imports now outweigh exports.
The most pronounced changes are evident in the trade of metal products, where exports to China have shrunk by around 25 percent, accompanied by a 25 percent increase in imports. Likewise, the automotive sector has experienced considerable contraction with exports down by 36 percent and electrical equipment suffering a 16 percent export decline. These trends are resulting in a reduction of German value creation and employment.
Jürgen Matthes, an expert in international trade at the IW and the study’s author, characterized the situation as a “China shock”. He highlighted the existing knowledge of significant subsidies provided by the Chinese government to its companies. A key revelation from the study is the apparent artificial undervaluation of the Chinese Yuan against the Euro, a factor that Matthes believes fundamentally explains the disparity between export and import performance. These subsidies and currency devaluation enable Chinese firms to offer products at exceptionally low prices.
Matthes expressed concern about what he described as unfair trade practices, stating that they are accelerating deindustrialization in Germany and urging the European Union to take proactive trade policy measures to level the playing field. He pointed to the limited import of Chinese electric vehicles since the implementation of European counterpart tariffs, which illustrates a tangible positive effect of this approach.
The imbalance in trade relations was a key topic of discussion at the recent EU-China summit in Beijing, where EU leaders pressed for advancements in market access and voiced criticism regarding China’s export controls on rare earth elements.
