China's export flood hits German industry as trade deficit surges to 89.3 billion euros

A widening trade deficit

China overtook the United States as Germany's top trading partner in 2025, but the headline masks a deep imbalance. German imports from China grew 8.8 percent to 170.6 billion euros, while exports to China shrank by almost a tenth. The result was a bilateral trade deficit of 89.3 billion euros. Across the EU, the deficit with China hit 365 billion euros last year. Over the past decade, EU exports to China have barely risen, but imports have nearly doubled.

The current Chinese five-year plan aims to lift industrial capacity from 30 to 45 percent, a shift that is expected to pull a large share of European demand toward Chinese factories. SRF reports that more than 400,000 German jobs have been lost since 2021 as demand for German goods in China has fallen.

German auto industry under siege

For years, German carmakers thrived in China. That era is fading. Wealthy Chinese buyers are spending less because of the real estate crisis, and when they do purchase a car, they increasingly choose domestic electric models. Meanwhile, heavily subsidised Chinese manufacturers are locked in a brutal fight for market share.

On German roads, the Chinese presence is small but growing fast. Chinese brands accounted for 2.3 percent of new car registrations in 2025; in the first half of 2026 that share climbed to 3.7 percent.

Machinery and batteries: the next front

China has already overtaken Germany as the world's leading machinery exporter. Backed by high state subsidies, Chinese producers now offer technologically sophisticated plant at low prices. The VDMA, Germany's engineering federation, is demanding better domestic conditions (bureaucracy cuts and tax relief), tighter market surveillance of imports, and EU anti-dumping duties on goods that violate fair-trade rules and are re-exported from third countries. The association also sees free-trade agreements as a way to secure market access for European firms.

Batteries are emerging as a parallel strategic dependency. European and German policy has long aimed to build domestic battery-cell production, but China remains the dominant supplier.

EU political shift toward protection

Brussels increasingly views China, not the United States, as the bigger long-term threat. France has advocated stronger defences for years; now German Chancellor Friedrich Merz, whose country once favoured restraint, is openly calling for more protection. SRF EU correspondent Andreas Reich notes that the political pressure to act is mounting as the economic damage spreads.

The pressure is already noticeable across Germany's entire industrial core.

Esther Goreichy, an economist at the Berlin-based Merics institute, says the China shock 2.0 strikes both sides of Germany's traditional growth model: exports and domestic industrial production.