Feeling the Heat: How Germany's Businesses in China are Suffering due to the Sino-US Trade War
Intensifying Trade Conflict Weighs Heavily on German Firms in China - Impact of Customs Dispute on German Businesses Operating in China
China's economic landscape is shrouded in uncertainty as German businesses bite their nails over the persistent trade spat between Beijing and Washington. According to a survey by the German Chamber of Commerce (AHK) in China, an astounding 56% of its members anticipate a marked deterioration in the economic situation over the next six months – a stark contrast from the 16% who held the same sentiment a year ago [1].
"This tariff war harms everybody," underscores Oliver Oehms, a managing board member at the AHK in North China. member companies claim that the economy in China will likely suffer – either directly or indirectly due to the deteriorating economic situation in the region [1].
The Stage of the Trade War
Since the escalation of the trade dispute in April, trade between the US and China has slowing to a crawl. President Trump slapped tariffs of 145% on Chinese imports, and Beijing countered with 125% tariffs on American imports [2]. This weekend, US Treasury Secretary Scott Bessent and Chinese Vice-Premier He Lifeng are slated to meet in Switzerland to discuss the tariffs [2].
Preliminary data suggests that both countries are already paying the price. In China, the purchasing managers' index has fallen, which translates into bleak business prospects for companies in manufacturing and services [2].
The Struggles German Firms Face
According to the AHK survey from mid-April, which polled 143 member companies – predominantly from the machinery and automotive sectors – tariffs, along with other trade barriers such as export restrictions, have the most devastating impact on companies [1].
The dismal outlook is reflected in business prospects. Just over a quarter expect a surge in sales by the end of the year, while a mere 18% anticipate increased profits [1].
Coping Mechanisms
38% of German companies in China are speeding up localization efforts to mitigate the effects of the tariffs [5]. This trend has been brewing for some time, as companies aim to boost their competitiveness in China or reduce the risk of non-compliance with Chinese regulations and dependence on international supply chains [5]. Twenty-five percent are contemplating alternative markets for their procurement instead of the US [5].
Calling on Berlin
German companies are also hoping for support from Berlin. Critical rhetoric about China from some political figures during the election campaign had left businesses craving more active engagement with China from the federal government [1]. About two-thirds of companies called for increased dialogue and closer collaboration with China [1].
Moreover, around half believe it is essential to improve Germany's image in China to help their business [1]. Controversial topics like human rights violations and unfair competition for foreign companies in China have stained the image of the People's Republic [3].
References:
- BR Bridge
- Deutsche Welle
- Handelsblatt
- Germanwatch
- BDI
- The persistent Sino-US trade war has led to a surge of pessimism among EC countries, particularly Germany, as tariffs between the two economic giants are taking a toll on their businesses in China.
- The current trade dispute has significantly affected many industries in China, with the purchasing managers' index showing a decline, particularly in manufacturing and services sectors, indicating bleak business prospects.
- In an attempt to navigate the challenges posed by the tariffs and trade barriers, many German companies are considering speeding up localization efforts, aiming to boost their competitiveness in China or reduce the risk of non-compliance with Chinese regulations and dependence on international supply chains.
