After years of China holding the position as Germany's top trading partner, the U.S. appears to be quietly overtaking it. Between January and March 2024, Germany's trade with the U.S. reached 63 billion euros ($68 billion), whereas trade with China was just under 60 billion euros.
Carsten Brzeski, the global head of macro research at ING Research, attributed this shift to several factors. Strong economic growth in the U.S. has driven up demand for German products while declining demand in China and increased domestic production of items once imported from Germany (particularly cars) have reduced China's need for German exports.
China had been Germany's main trading partner for years, but the gap between China and the U.S. has closed in recent years. Holger Schmieding, chief economist at Berenberg Bank, noted that the U.S. has long been a bigger market for German exports than China. While U.S. demand for German exports has risen, demand from China has fallen due to a slowing Chinese economy and competition from government-backed Chinese companies.
The U.S. is also becoming increasingly significant in German imports. Germany has been pursuing a strategy of reducing reliance on China, encouraging businesses to "de-risk" last year. Despite stressing that China remains a vital partner and should not be "de-coupled," Germany acknowledges the rising "systemic rivalry" between the two.
Tensions between the European Union and China have also heightened, with both parties investigating each other's trade practices and considering tariffs. A recent survey by the German economic institute Ifo revealed that the percentage of companies dependent on China dropped from 46% in February 2022 to 37% in February 2024, primarily due to a reduction in reliance on Chinese manufacturers.
Brzeski highlighted that the growing importance of the U.S. as Germany's primary trading partner reflects a changing trade landscape and gradual decoupling from China.
Key Points
U.S. Takes the Lead: The United States has surpassed China to become Germany's largest trading partner, with total trade between them reaching 63 billion euros ($68 billion) in the first quarter of 2024.
Economic Factors: Strong economic growth in the U.S. has boosted demand for German goods, while China's economic slowdown and increased domestic production have reduced its reliance on German imports.
Trade Strategy Shift: Germany has encouraged businesses to reduce their dependence on China, while tensions between the European Union and China over trade practices have contributed to this shift.
FAQs
Q1. Why has the U.S. overtaken China as Germany's main trading partner?
Economic growth in the U.S. has increased its demand for German products. Meanwhile, China's economy has slowed, and it now produces goods it previously imported from Germany.
Q2. What challenges or opportunities does this shift present for Germany?
The shift provides an opportunity to expand U.S. trade ties but challenges Germany to maintain good relations with China amid changing trade strategies and rising global competition.
Q3. Is China Germany's largest trading partner?
No, China is no longer Germany's largest trading partner. Recently, the United States has surpassed China and become Germany's biggest trading partner. This change is due to stronger economic ties between the U.S. and Germany, while trade with China has decreased.