The United States is about to topple China as Germany’s largest trade partner by 2025, according to a recent report by the German Chamber of Industry and Commerce (DIHK).
In 2023, trade between Germany and China reached approximately 253 billion euros ($273 billion), narrowly keeping China at the forefront of Germany’s trade relationships for the eighth year. However, the US is closing in with trade volume of 252.3 billion euros ($272.6 billion).
This change is largely fueled by an increase in German exports to the US, which last year amounted to nearly 158 billion euros ($170.7 billion), accounting for about 10% of Germany’s total export volume.
DIHK’s Volker Treier pointed out a noticeable downturn in demand for German products in China, with exports dropping nearly 9% in key sectors like automobiles and chemicals. Additionally, imports from China saw a reduction of almost 20%. German officials have been vocal about the risks of over-dependence on China, advising a strategic pivot towards diversifying trade relations, especially considering China’s dual role as a partner and competitor.
The US market has been a primary export destination for German goods since 2015, benefiting from significant direct investment. Treier emphasized the U.S. economy’s robust performance compared to other major markets, highlighting its appeal to German businesses.
According to fDi Markets as reported by Financial Times, in 2023, German companies committed a record $15.7 billion to US projects, a significant rise from $8.2 billion the previous year, and almost three times the $5.9 billion pledged in China.
This surge in German interest is partly attributed to the attractive conditions fostered by the US government, including the Inflation Reduction Act and the Chips And Science Act. These policies offer over $400 billion in incentives, aiming to revitalize US manufacturing and accelerate the transition to renewable energy.
Unsurprisingly, the biggest investments from German companies are in the manufacturing sector, primarily in automotive, batteries, and semiconductors.
Information for this story was found via DIHK, FT, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
