Germany’s China Policy: Is It Misguided? – Analysis
By James Durso
The US market is still a safer bet for the German economy than the Chinese one.
President Donald Trump has taken a tough stance on China after years of indifference by past American presidents. At the recent summit in Beijing with Chinese leader Xi Jinping, Trump secured a number of key economic concessions that benefit America.
The president isn’t alone in this push. A coalition of five European nations—France, Italy, Spain, the Netherlands, and Lithuania—recently urged the European Union to slap more tariffs on China to counter its trade abuses.
So why is the most powerful country in Europe undercutting all this hard work?
Less than two weeks after Trump returned from China, Germany sent its trade minister to Beijing to try to strengthen industrial ties. Unlike Donald Trump, who came armed with a list of American grievances, Katherina Reiche is treating China like just another business partner.
This is no coincidence. As the US leverages tariffs to pressure China toward needed reforms and the EU works to reduce its dependence on cheap Chinese exports, Germany has often stood in the way. An article at Euronews puts it this way: “Germany remains the main chokepoint in the EU’s strategy towards China.”
The main reason for this is Germany’s iconic automotive industry. Berlin has long viewed China as the main growth market for brands like Volkswagen and BMW, especially as Americans embrace Japanese cars over their European counterparts. This has made Germany reluctant to rock the boat in its relations with China.
Yet not only does this approach overlook China’s long history of trade violations, IP theft, economic espionage, and the like, but it’s also bad policy for Germany. China is actively working to replace imports with domestic manufacturing, including its own cars and electric vehicles.
The result has been plunging German car sales in China as Germany is starved of a major export market. Hence, why the Centre for European Reform warns that “Germany’s complacency” toward China could result in an economic “shock.”
But beyond undermining its own economy, Germany’s soft stance on China also risks undermining the United States, still its most important ally.
This risk was seen when German Prime Minister Friedrich Merz recently called for a trade deal between the EU and China. Not long afterward, he criticized the United States for its “social climate” and said he wouldn’t advise his children to move there. Merz has been feuding with Donald Trump lately, which likely explains his comments. But it’s still a striking contrast to his embrace of China, one the White House no doubt noticed.
Washington is already in a bad mood with the Germans and has been working to reverse certain policy imbalances. For example, the Trump administration has sought to lower prescription drug costs, which Germany imports from the United States and then imposes price controls on.
German negotiators extract deeper price concessions because they control a unified, near-compulsory market, and lower German prices ultimately raise prices in the freer American market. This was a point made this month by US Trade Representative Jamieson Greer and chief health department adviser Chris Klomp during their meeting with the German ambassador. German free riding on American pharmaceuticals must end, the Trump team said, and from an American perspective, this makes perfect sense.
It also underscores a larger trend: Germany might view China as a growth market, but it benefits far more from its under-the-wing relationship with the United States. This is, of course, most obvious on defense, where the still-weak German armed forces are backed by the might of the American military and US security guarantees. But it’s also true on trade; America is still Germany’s largest export market.
President Trump has clearly signaled to Germany that it must choose between Beijing and Washington. And while Merz has never explicitly made that choice, his government is distancing itself from America while remaining warm with China.
Given Trump’s leverage and China’s active displacement of German exports, this doesn’t seem wise in the long run. As the Centre for European Reform puts it, “China has already eaten much of German industry’s lunch and is preparing to start on dinner.”
Even if Germany isn’t actively working to undermine America’s position on China, Trump is likely to interpret it that way. It’s time for Germany to stop being a global outlier on China and remember the benefits of a fruitful relationship with the United States.
- This article was published at National Interest
