China Nears Tipping Point: Set to Dethrone US as Germany’s Top Trade Partner by H1 2025
Move over, America—China’s trade machinery is revving up for a historic shift. By the first half of 2025, Germany’s economic dance card may have a new lead partner.
The numbers don’t lie: Beijing’s export juggernaut is closing the gap fast. Forget ‘decoupling’—this is a full-blown recalibration of global trade alliances, and Frankfurt’s ledger books are ground zero.
Meanwhile, Wall Street analysts are too busy chasing crypto ATHs to notice the tectonic plates moving beneath them. Classic.
The US remains in the lead, but only by a thin margin
China’s attempt to overtake the United States as Germany’s largest trading partner was driven by a 3.9% decline in German exports to the U.S., a side effect of new U.S. tariffs introduced under the TRUMP administration.
Meanwhile, imports from China ROSE by 10.7% year-on-year in the first half, crossing the 80 billion euros threshold. Commentators think the surge is proof China has started redirecting trade from the U.S. to Europe. The goods are cheaper thanks to a significant undervaluation of the yuan against the euro, which makes the relationship profitable.
German exports to China fell 14.2% to 41.4 billion euros as exporters struggled amid increased competition from Chinese manufacturers.
The sharp decline in exports to China, as well as the surging imports, has led to a record trade deficit of 40 billion euros, similar to the one from 2022. However, observers think things could get worse.
“As the year progresses, losses in German exports to the U.S. are likely to continue and even intensify,” Juergen Matthes, head of international economic policy at the Cologne Institute for Economic Research said.
Commerzbank now expects new U.S. tariffs to slow down German exports by 20% to 25% over the next two years. This gives China even more opportunities to reclaim the top spot among Germany’s trading partners over the course of the year.
Global trade is going through a realignment
The world has drastically changed since Donald Trump became POTUS as he introduced sweeping reforms as well as tariffs that have upset the norm and forced global trade realignments.
Those tariffs have significantly weakened transatlantic trade and has left countries no choice but to be diplomatic, as they seek to protect their interests without crossing Trump who has shown he is willing to use the tariffs as a control tool.
In April, the World Trade Organization (WTO) sounded a warning about the state of things, revealing global merchandise trade is expected to decline by 0.2% this year, with North America facing a significant 12.6% drop in exports.
It claimed the decline could be even worse, increasing to 1.5%, should trade tensions worsen. Director-General Ngozi Okonjo-Iweala spoke about the global impact: “The enduring uncertainty threatens to act as a brake on global growth, with severe negative consequences for the world, particularly for the most vulnerable economies.”
The Brookings-FT Tracking Indexes for the Global Economic Recovery shared a similar sentiment and also came up with related findings that saw one analyst forecast a bleak future for “every open economy that relies on trade” as they are reportedly expected to get squeezed.
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