During his China visit starting Friday, Economy Minister Robert Habeck will stress Germany’s trade commitment, though analysts favor U.S.-German ties.
Habeck will explain the EU’s duties on Chinese EVs to officials, minimizing the risk of Chinese reprisal against German exporters.
Germany’s Q1 2024 trade with China was less than its $64 billion trade with the US.
That broke a pattern that had China ranked as Germany’s top trading partner for eight consecutive years.
German exports to China fell 14% in May, while exports to the US rose 4.1%, according to Friday’s official data.
China may face stagnation like Japan’s “lost decades” due to real estate crises, local government debt, and low domestic activity.
Maximilian Butek says German partners remain dedicated to China, believing demand will rise in coming years.
However, if China’s private sector confidence remains low, the US could establish itself as Germany’s leading trading partner.
China, a longtime buyer of German goods, is slowing German exports as it now produces more sophisticated goods itself.
The key question, however, is the impact of Germany’s goal to cut trade exposure to China, accused of “unfair practices.”
Berlin aims to strengthen ties with allies like South Korea, but has not detailed policies to reduce dependency.
Yet, Juergen Matthes, overseeing foreign economic policy at the German Economic Institute IW, sees a shift in Sino-German relations.
“A reorientation – also geopolitically motivated – seems to be taking place: away from system rival China and towards transatlantic partner the United States,” he said.
If Donald Trump wins the US election, triggering a global trade war, all bets would be off.
Roland Berger’s report this month indicates major economies, notably China and the US, would suffer more than Europe.
Ultimately, it could lead to a global split into two incompatible trading blocs, an extreme version of economic “fragmentation.”
That would force export-oriented economies like Germany to make difficult geopolitical and commercial decisions.
Stefan Schaible, global managing partner at Roland Berger, stated that “Trump will force Europeans to decide on which side they want to be – with China or with the United States,” and that Germany would undoubtedly have to select its NATO ally.
Click here for more news on Finance and Investing.