China’s Push for Control Shrinks Space for Foreign Exporters
Germany’s export engine sputtered badly in 2025, and the damage was most visible in its two most important overseas relationships.
Trade with both the United States and China weakened sharply, leaving Europe’s largest economy with shrinking order books and little optimism that conditions will improve meaningfully in the year ahead.
Key takeaways
- German exports to both the U.S. and China fell sharply in 2025
- The two markets, once growth engines, became major drags on trade
- Tariffs, weak global demand, and domestic cost pressures weighed heavily
- Trade groups see little chance of a strong rebound in 2026
According to figures cited by the German wholesale and foreign trade association BGA, exports to the United States fell by more than seven percent, dropping below €150 billion. Shipments to China declined even more steeply, sliding ten percent to roughly €81 billion, based on data from Germany Trade & Invest. Together, the two markets — long pillars of German export growth — turned from drivers into drags.
BGA president Dirk Jandura offered a blunt assessment of the outlook, warning that 2026 is unlikely to bring a meaningful rebound. At best, he said, exporters may get a short pause in the decline rather than a genuine turnaround.
Tariffs Abroad, Pressure at Home
On the U.S. front, trade frictions played a decisive role. Jandura described American tariffs on European goods as friction that slowed transatlantic trade and squeezed margins. Higher costs left German exporters with less flexibility just as demand softened.
Those external pressures collided with domestic weaknesses. A strong euro, elevated energy prices, heavy regulation, and weak investment continued to weigh on Germany’s industrial base. The result was a deeper manufacturing slowdown. Germany’s HCOB manufacturing purchasing managers’ index fell to 47.0 in December, according to S&P Global — firmly in contraction territory. Export orders declined for a fifth consecutive month, while production fell at the fastest pace in a year.
Companies responded by cutting back on purchases, trimming inventories, and reducing staff. Job losses accelerated to their fastest rate in six months, underscoring how broadly the slowdown has spread through the industrial sector.
China Turns Inward — and Tightens Control
China offered little relief for German exporters in 2025, as Beijing doubled down on domestic self-reliance across both industry and technology. State support for local manufacturers continued to reduce demand for imported machinery, vehicles, and chemical products — areas where German firms have traditionally dominated. As a result, local competitors increasingly displaced foreign suppliers, stabilizing output inside China while shrinking export opportunities for German factories.
That inward turn is not limited to manufacturing. Regulators are now extending tight oversight into advanced technologies, including artificial intelligence. Draft rules released by the Cyberspace Administration of China signal far stricter supervision of AI systems that simulate human interaction, requiring constant disclosure to users, psychological risk monitoring, and mandatory ideological alignment. The approach reflects a broader pattern: innovation is encouraged, but only within rigid political and social boundaries.
For German companies, the implication is structural rather than cyclical. More firms are responding by shifting production inside China or redirecting capital toward other Asian markets, rather than relying on exports from Germany. While President Xi Jinping has pointed to roughly 5% GDP growth in 2025 as evidence of economic resilience, that growth is increasingly driven by domestically controlled supply chains and tightly governed technology ecosystems — leaving fewer openings for foreign exporters.
Cautious Optimism, Thin Evidence
Despite the bleak trade data, German manufacturers have not completely abandoned hope. Surveys show a modest improvement in production expectations, driven largely by plans for new products and anticipated government spending on defense and infrastructure. For now, however, that optimism remains speculative.
As Germany heads into 2026, its exporters face a difficult reality: key markets are weaker, global trade is more fragmented, and domestic constraints remain unresolved. Whatever growth exists elsewhere, it is increasingly bypassing German factories — and that may prove far harder to reverse than a single bad year of trade numbers.
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