Germany and China’s ‘One-Sided Trade Model

May 22, 2026

Germany risks repeating the United States’ early 2000s deindustrialisation if it continues to admire China’s export success, a report has said and warned Europe’s largest economy about a sharp rise in bilateral trade imbalances and targeted Chinese industrial policies. Germany remains hesitant, even as China has already eaten much of German industry’s lunch and is preparing to start on dinner.

China’s surplus with Germany doubled to $25 billion between 2024 and 2025, creating a $94 billion trade imbalance, indicating a fall in demand for German industrial goods. “China Shock 1.0” inflicted severe damage in the United States, with job losses of up to 2.5 million, followed by a rise in suicides and drug use in US towns that lost industries to China. Germany’s cities like Wolfsburg and Stuttgart, bases of Volkswagen and Mercedes-Benz, could face a similar future as Chinese advancement is “more consequential in Germany than in any other country and is worsening.”

The think tank alleged that German political leaders “struggled to see the problem clearly”, adding that Xi Jinping’s five-year policy cycles have triggered a second China shock similar to the early 2000s. Beijing’s policy project named the “10,000 little giants” programme is specifically targeting Germany’s Mittelstand of mid-sized industrial suppliers.

The report blamed the Chinese trade imbalance on weak domestic demand in China, an extremely unfavourable exchange rate and Chinese industrial policy targeting Germany’s industrial base. Berlin urged to play an offensive role and support Paris in pushing the IMF and G7 to confront China’s currency undervaluation and onesided trade model.” China’s gains in EVs, solar and batteries owe less to a master plan than to political centralisation combined with rivalry across provinces and cities.