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Merz highlights concerns over Germany-China trade gap
German Chancellor Friedrich Merz called the growing trade deficit with China "not healthy" during his first official visit to Beijing, as federal data revealed imports from China were more than double Germany's exports to the country last year.
Record trade imbalance raises alarms
In 2025, Germany imported €170.6 billion worth of goods from China-an 8.8% annual increase-while exports to China dropped 9.7% to €81.3 billion. The deficit has quadrupled over the past five years, according to government statistics.
Jürgen Matthes, head of International Economic Policy at the German Economic Institute (IW), warned the imbalance is "eroding the core of German industry," particularly in automotive, machinery, and chemicals sectors. He attributed the gap to "massive" Chinese subsidies and currency undervaluation, telling the BBC such price advantages "cannot just come from more innovation and efficiency."
"The situation is unsustainable for Europe's largest economy," Matthes said.
China's response and economic pressures
Beijing has previously defended its subsidy policies as transparent and compliant with global trade rules. On currency controls, China stated it maintains a market-based exchange rate regime, though with managed adjustments when necessary.
The EU-wide trade deficit with China, dubbed the latest "China shock," stems partly from pandemic disruptions and Russia's invasion of Ukraine, which drove up European production costs. Meanwhile, China faced prolonged deflation due to overinvestment in manufacturing, creating excess capacity, according to Brussels-based think tank Bruegel.
Diplomatic tensions and industry calls for action
Merz, accompanied by a delegation of German business leaders, urged Beijing to use its influence with Moscow to help end the war in Ukraine. However, the trade imbalance dominated discussions.
Industry groups pressed the chancellor to address competitive distortions and export controls on critical rare earths. The Federation of German Industries emphasized the need to tackle "unfair competition," while the German Engineering Federation called for EU action to "restore fair conditions."
Merz announced China's agreement to purchase up to 120 Airbus aircraft, a move seen as a partial counterbalance to the trade gap.
Strategic shifts and EU divisions
Analysts note a growing divide within the EU over trade policy. Noah Barkin, a senior fellow at the German Marshall Fund, observed that France pushes a protectionist agenda, while Germany remains skeptical of tariffs, despite launching anti-dumping cases against China.
"No one in Europe wants a two-front trade war with the U.S. and China," Barkin said. "But China needs markets for its overcapacity, giving Europe leverage."
The EU has proposed boosting domestic production and reducing foreign dependencies, though Barkin noted the bloc struggles with "classic trade defense tools" like tariffs, unlike the U.S.
Germany's evolving China strategy
Merz acknowledged the risks of deep economic ties with China but ruled out decoupling, stating it would be a "mistake." His comments reflect Germany's struggle to reconcile its free-trade principles with geopolitical realities.
Speaking to reporters, Merz said, "We want to strengthen our partnership... However, we will also protect our interests."
The visit underscores Berlin's departure from former Chancellor Angela Merkel's "change through trade" approach, which critics argue prioritized economic ties over human rights concerns.
