U. S. Replaces China as Germany's Largest Trading Partner

Germany has been pursuing a new China strategy, urging companies to “de-risk” from China last year. China is to remain a partner for Germany, the Chinese government has stressed, and there should not be a “de-coupling”, but “systemic rivalry” has increasingly characterized the relationship between the two parties.

TMTPOST--China has ceded the position as Germany's top trading partner to the United States in the first quarter of 2024, according to recent data from Germany’s Federal Statistical Office (Destatis) 4.

This seismic shift occurs amid heightened economic and geopolitical tensions between China and the United States, and marks a turning point for Germany, whose biggest trading partner had been China since 2015.

In 2023, China became Germany's largest trading partner for the eighth consecutive year, with a trade volume of €253 billion, although only a few hundred million euros ahead of the United States.

The change is largely attributed to the shifting economic climate recently. Germany, experiencing a recession, has reduced its imports compared to previous years. Similarly, Chinese demand has dwindled due to its struggling real estate sector. Germany’s trade with China amounted to €60 billion in the first quarter of 2024, while trade with the United Stated reached €63.2 billion.

A key factor driving the U.S.'s rise as Germany's top trade partner is the continuous growth of German exports to the U.S. With nearly €158 billion worth of goods exported to the U.S. in the past year, the U.S. now accounts for approximately 10% of Germany's total exports. In the contrary, demand for German products in China has shown signs of slow growth, resulting in a nearly 9% decline in exports to China, valued at roughly €97 billion.

German exports to the United States increased further due to the strong U.S. economy, while both Germany’s exports to and imports from China declined, said Commerzbank economist Vincent Stamer.

Structural reasons were also at play, Starmer pointed out. China has moved up the value chain ladder and is increasingly producing more complex goods on its own, which used to be imported from Germany, he noted.

In addition, German companies are increasingly producing locally rather than exporting goods from Germany to China, he added.

Some experts anticipate this trend to persist. In a January study, Germany's foreign trade agency, Germany Trade and Invest, projected that, due to the Chinese real estate crisis and escalating geopolitical risks with the U.S., China could permanently lose its position as Germany's leading trading partner.

Germany has been pursuing a new China strategy, urging companies to “de-risk” from China last year. China is to remain a partner for Germany, the Chinese government has stressed, and there should not be a “de-coupling”, but “systemic rivalry” has increasingly characterized the relationship between the two parties.

Tensions have also increased between the European Union and China, with the two launching investigations into each other’s trade practices and threatening to slap tariffs on imports.

A recent survey by the German economic institute Ifo found a decline in the number of companies dependent on China, signaling a shift towards diversification. German leaders emphasize the need to mitigate reliance on China and view the growing partnership with the U.S. as a strategic alternative. Since 2015, the U.S. has been the most significant export market for the German economy, attracting substantial direct investments from Gernmany.

The strong performance of the U.S. economy has played a crucial role in enhancing its appeal as a trade partner for Germany.

Volker Treier, the head of foreign trade at German Chamber of Commerce and Industry, highlighted that the U.S. economy outperforms many other important sales markets for Germany, including those within the European Union. Moreover, German exports stand to benefit from the strength and attractiveness of the U.S. economy.

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