As always, it is called defense.
“FRANKFURT -- For two decades, Germany and China were an economic couple made in heaven, both benefiting handsomely from booming global trade: Germany supplied the machines China needed to make consumer goods for the rest of the world.
Now, China no longer needs Germany -- and Germany wants a divorce.
For the first time in decades, German businesses and politicians are questioning the unfettered free trade that turned the country into an industrial powerhouse. Its manufacturers want protection from cheaper, faster and increasingly better Chinese rivals.
In November, German Chancellor Friedrich Merz said Berlin would protect domestic steelmakers from Chinese competitors. His government has tightened a ban on Chinese components in mobile-data networks, and has signaled support for "buy-European" clauses for public tenders.
In its first meeting in November, Merz's newly created National Security Council addressed the strategic risks of China's dominance of several critical minerals. It is working on diversification measures, a German official said.
Germany's estrangement from China has been in the making for some time. Helped by low production costs, a weak yuan and state subsidies, Chinese manufacturers are leading in sectors that German companies dominated until recently, not only in China but in other markets, including in Europe.
Its timing, though, has much to do with President Trump. A wave of cheap Chinese goods, from chemicals to car parts, began washing over Europe this year after bouncing off the U.S.'s new tariff wall, economists and business executives say.
As a result, a country that once was a beacon of economic liberalism is warming to protectionist measures. The fading of Europe's most influential free-trade voice shows how the global economy is fragmenting amid competition between the U.S. and China, and a backlash against globalization led by ascending Western populist forces.
Germany's pivot hasn't reached all corners of its economy and government. The larger a company's exposure to China, the harder it is for it to reverse course. Some carmakers and chemicals producers are still investing heavily in China. German politicians also are watching as allies oscillate between confronting and pacifying Beijing. The direction of travel is becoming clear, however, originating among businesses, later percolating through the country's influential lobby organizations and, recently, government.
The Federation of German Industries fired the opening shot in 2019, when it ditched its China-friendly position in a report to call the country a "systemic competitor." This year, the VDMA federation of machinery makers -- export-oriented business-to-business companies that form the backbone of Germany's economy -- accused China of unfair competition. It has called for antidumping measures and sanctions against Chinese exporters that ignore European legislation.
The government, in addition to a new economic-security strategy it plans to publish next year, is working on "projects that address the increasing economic, technological and security policy risks in dealing with China," said the German official familiar with the deliberations.
German Foreign Minister Johann Wadephul, speaking this month during his first trip to China, said European companies need better access to the Chinese market and to resources the country produces.
China's graduation from buyer to maker of investment goods has been meteoric. Between 2019 and 2024, Germany lost its global market-share lead to China for power-generation equipment and machinery, show data in a coming report from Rhodium, a think tank.
Germany's lead in chemicals and road vehicles is paper-thin and it is trailing far behind China in the electrical-equipment market. This year for the first time, Germany imported more capital goods from China than it exported there.
Total German exports to China have fallen by a quarter since 2019 while imports rocketed. Germany's trade deficit in goods and services with China is set to reach a record 88 billion euros this year, about $102 billion, show German government figures. This has left deep scars.
Germany's manufacturing output has fallen 14% since peaking in 2017. The industrial sector has shed nearly 5% of its jobs since 2019, says consulting firm Ernst & Young.” [1]
It could be, that real story here is: China doesn't need Germany anymore, and Germany is going crazy.
1. World News: Germany Seeks Divorce From China. Fairless, Tom; Bertrand, Benoit. Wall Street Journal, Eastern edition; New York, N.Y.. 17 Dec 2025: A8.
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