In a surprising turn of events, the United States is steadily rising as Germany’s primary trading partner, surpassing China in trade volume. Data shows that total trade between Germany and the U.S. reached 63 billion euros ($68 billion) in the first quarter of 2024, outpacing trade between Germany and China, which amounted to just under 60 billion euros. This shift reflects a significant change in trade dynamics that have been evolving over recent years.
The shift in trade patterns can be attributed to various factors, according to Carsten Brzeski, global head of macro research at ING Research. Strong growth in the U.S. has fueled demand for German products, while decoupling from China, weaker domestic demand in China, and China’s increased ability to produce goods previously imported from Germany have all contributed to the decline in German exports to China. These factors have collectively played a role in reshaping Germany’s trade relationships with its key partners.
While China has historically been Germany’s largest trading partner, the gap between China and the U.S. has been shrinking in recent years. The U.S. market remains vital for German exports, with a trend of growing exports to the U.S. and decreasing exports to China. Holger Schmieding, chief economist at Berenberg Bank, highlights the Chinese economy’s challenges and the rising competition German companies face from subsidized Chinese firms, further emphasizing the expanding role of the U.S. as a trading partner.
Germany has responded to the changing trade landscape by adopting a new strategy towards China, with a focus on reducing risks associated with trading with China. While maintaining China as a partner, Germany is increasingly emphasizing the need to address systemic rivalry and potential trade conflicts. Tensions between the European Union and China have also escalated, leading to investigations and tariff threats. German companies are adapting to the evolving trade environment by reducing dependence on Chinese inputs, as evidenced by a decline in the percentage of companies reliant on China.
The growing significance of the U.S. as Germany’s primary trading partner signals broader shifts in global trade patterns. The gradual decoupling from China and the increasing emphasis on trade diversification highlight the evolving nature of international trade relationships. As trade dynamics continue to evolve, countries and companies alike must adapt to changing market conditions and geopolitical uncertainties to remain competitive in the global economy.
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