Germany's Merz heads to China as trade tensions threaten Europe's economic future
German Chancellor Friedrich Merz is set to visit China at a critical time for EU-China relations. The trip comes as German industries face growing pressure from shrinking exports, rising imports, and a record trade deficit with Beijing. Analysts see the visit as a key moment that could shape Europe's approach to an increasingly assertive China.
Germany's economic ties with China have weakened in recent years. Auto exports to China fell by 54% from 2022 to just 13.6 billion euros, while imports surged, pushing the trade deficit to a record 87 billion euros in 2025. The automotive, machinery, and chemicals sectors have been hit hardest, with DAX-listed companies seeing their China revenue share drop from 18.6% to 14.9% over four years. Chinese overcapacity and competition have further strained German manufacturers, many of which now produce locally in China rather than exporting from Europe.
China's state-backed industrial model has tightened its grip on global supply chains, squeezing German firms in the process. Beijing aims to use Merz's visit to project stability, particularly as US-China tensions escalate. Yet German officials warn that China's excess capacities and Europe's lingering dependencies create instability rather than cooperation.
Merz is expected to set clear boundaries during talks with President Xi Jinping. A key message will be that Europe will defend its industrial future, using tools like the anti-coercion instrument if market access is blocked. He should also push for a broader 'level playing field' package as part of Europe's competitiveness agenda once back in Brussels.
Beyond bilateral talks, Europe must align with other major economies on trade defence and economic security. Coordinated action in strategic sectors could help counter China's dominance in global value chains and prevent further erosion of European industries.
The visit marks a turning point in how Europe engages with China's economic policies. Merz's stance on excess capacities, trade imbalances, and industrial competition will signal whether Germany is ready to shift from dependence to a more assertive strategy. The outcome could influence broader EU efforts to safeguard its economic interests in the face of China's expanding industrial might.
