Regardless of short-term developments—be it a ceasefire or a potential end to the trade war—China’s global trade strategy is undergoing a structural shift. The direction of its exports is being diversified, and Europe, particularly Germany, is becoming a key destination for high-value goods. As China gains competitiveness, German firms risk losing ground—not only in global exports but also within the EU and eventually in their own domestic markets. This shift could weigh heavily on Germany’s GDP and impact countries in Central and Eastern Europe closely tied to the German supply chain, including Poland.
A Trade Reorientation That Could Disrupt Europe
The U.S.–China trade conflict is altering trade flows, with Europe absorbing a growing share of China’s redirected exports. Germany, as the EU’s industrial powerhouse, is particularly exposed. Over the next three years, Germany may absorb 14% of China’s redirected export surplus, resulting in a 2.5% increase in German imports. While this could slightly raise the domestic value added (VA) in final consumption by +0.12%, it would be offset by a +0.47% rise in Chinese VA within Germany’s consumption—signaling a displacement of domestic production.
Allianz Trade estimates that this trade shift could reduce German GDP growth by 0.2–0.3 percentage points over the next three years. This would ripple across the EU supply chain, especially affecting Eastern European countries that depend on German industrial demand.
Germany’s Export Model Under Strain
The German export-driven industrial model is already under significant stress due to intensifying Chinese competition, subdued global demand, high energy prices, and worsening trade conditions. Allianz Trade warns that Germany faces “deindustrialization” risks, though gross industrial VA has remained stable since 2021—suggesting that profitability and savings accumulation are more resilient than production volumes suggest.
To remain competitive, German firms are pivoting toward high-tech products, R&D, and integrated services, as competing on price with low-wage economies like China is no longer feasible. Still, Germany continues to lose market share both globally and within the EU, especially since 2020. From 2020 to 2024, Germany’s share in the EU import market for advanced goods fell by 14 percentage points, while China’s share rose significantly.
Sectors such as machinery, vehicles, electronics, chemicals, and pharmaceuticals—cornerstones of the German economy—have suffered the most. The escalation of U.S.–China trade tensions in April 2025 has only accelerated China’s redirection of exports toward Europe, intensifying the competitive squeeze on Germany.
Chinese Imports Threaten German Industry and Jobs
Over the next three years, Germany is expected to absorb $32.8 billion of additional Chinese exports—a 19% increase in imports from China and a 2.5% rise in overall German imports. Sectors most vulnerable include machinery (where China already holds a 19% import share), textiles, non-metallic mineral products, electrical equipment, computers, and motor vehicles.
Allianz Trade forecasts that these shifts could structurally endanger approximately 500,000 manufacturing jobs in Germany—or about 7% of the total. Between 17,000 and 25,000 jobs (0.2–0.3% of total manufacturing employment) are estimated to be at risk. The hardest-hit sectors are:
- Machinery & Equipment: High exposure, with 31% of jobs vulnerable, though estimated job loss remains limited to around 1%.
- Textiles: 13% exposure, with 2% of jobs at risk.
- Non-metallic Mineral Products: 10% exposure, 1% of jobs at risk.
Regionally, areas such as Upper Franconia and Tübingen (textiles and electronics) and Freiburg (computers and metals) are most exposed due to their industrial makeup. These pressures come on top of a strained labor market shaped by two years of recession, energy cost shocks, weak export demand, and growing protectionism.
Broader Economic Impact on the EU
Germany’s economic slowdown could marginally affect its key EU trade partners. Over the next three years, German GDP may shrink by as much as 0.26 percentage points, with most of the decline (0.25pp) driven by increased domestic competition from Chinese imports. Additionally, Germany may lose $10.5 billion in intra-EU exports due to increased Chinese presence in other EU markets, shaving off another 0.01pp from trade with its partners.
While the macroeconomic shock may appear modest, the compounded impact of redirected Chinese exports, protectionist responses, and trade diversion could cost Germany up to 1.3 percentage points in cumulative GDP growth by 2028. Inflation is expected to decline slightly, by around 0.05pp over the same period.
EU countries integrated into Germany’s supply chain will feel the ripple effects. The eurozone as a whole could see its GDP growth reduced by 0.07pp over three years. Countries most affected include:
- Czech Republic: -0.05pp
- Hungary, Luxembourg, Slovakia: -0.04pp each
While these figures may seem small, the impact could be magnified by each country’s exposure to redirected Chinese trade and dependence on U.S. market dynamics.
Sources: Allianz Research, OECD, World Bank, Oxford Economics, Eurostat, UNComtrade
Original article: CEO.com.pl – China’s Post-Tariff Export Surplus Hits Europe: Germany Under Growing Pressure
