Germany's China trade deficit set to exceed €100 billion as automotive surplus collapses

The automotive surplus that fell from more than €23 billion in 2019 to about €1 billion this year is the clearest single measure of how far Chinese competition has moved into Germany's core export industries [6]. The same pattern now shows up in machinery and electrical equipment [6]. What is not settled is whether Berlin's new backing for EU trade instruments turns into measures that reach the border [5].

A deficit seven times its 2019 level

The IW projection rests on first-half trade flows. Germany imported almost 2.5 times as much from China as it exported in the first six months of 2026 [6].

If those trends hold, the annual deficit would pass the previous record of about €90 billion, set in 2025 [6]. German goods exports to China are projected to be roughly 25% below their 2019 level, while imports from China are expected to be about 62% higher [6]. The automotive industry accounts for almost 24% of the projected increase in the deficit since 2019, the institute said, making it the largest single contributor [6]. Around 420,000 manufacturing jobs were lost between 2019 and 2025, according to a study by the Cologne-based ZOE Institute for Future-fit Economies [9]. That study described the fall in German production and employment as structural rather than cyclical [9].

The automotive surplus collapses

The car trade is where the reversal is sharpest. Germany's automotive surplus with China is expected to shrink from more than €23 billion in 2019 to about €1 billion this year [6].

Automotive exports to China are projected to fall 54% over that period, while imports of Chinese vehicles and parts rise more than 475% [6]. Rhodium Group data cited by DW put German car exports to China down 66% between 2022 and 2025 [5]. In the other direction, imports of new Chinese-made cars into Germany rose 121% in the first seven months of the year, Destatis reported [5]. Chinese-made vehicles accounted for nearly 14% of total vehicle imports [5]. China has fallen from Germany's second-largest export market to its ninth since 2021, according to Germany Trade & Invest data for the first half of 2026 [5].

One month of better output does not reverse that. Destatis said on 6 November that industrial production rose 0.7% in September from August, with car output up 17.1% after two weak months [12].

Beyond cars: electrical equipment and machinery

The pattern is no longer confined to cars. The electrical equipment deficit is forecast to exceed €24 billion, against €4.8 billion in 2019 [6].

Machinery manufacturing is expected to record its first trade deficit with China, at slightly more than €1 billion, reversing a surplus of nearly €10 billion in 2019 [6]. Energy-intensive industries including chemicals, paper, glass and metals account for only around €4 billion of the widening gap, the IW said [6]. The institute argued that higher energy costs explain only a small part of the deterioration [6]. It attributed most of the shift to China's technological advances and to what it called competitive distortions, including subsidies and a sharply undervalued currency [6]. At EU level, Eurostat put the bloc's goods deficit with China at around €360 billion last year, effectively €1 billion per day, and it widened again in the first half of 2026 [5].

Exposure has grown, not shrunk. Analysis by the Global Public Policy Institute shows Germany moved from the 10th most exposed country to China in 2013 to third, behind South Korea and Russia [7].

Berlin switches sides on trade defence

German policy has turned. As recently as 2024, Berlin lobbied other EU capitals against tariffs on Chinese electric vehicles [8].

Last week Chancellor Friedrich Merz and French President Emmanuel Macron wrote jointly to European Commission President Ursula von der Leyen [5]. They sought a new tool to cut a trading partner off from the EU single market if what they called unfair practices continue [5]. The letter was aimed at Beijing. China's Commerce Ministry warned that Europe would suffer the consequences if it adopted such a kill-switch plan [5]. Germany and France have also pushed to strengthen the existing anti-coercion instrument, making it faster, more effective and easier to deploy, MENAFN reported on 7 October [10]. Noah Barkin, a senior adviser at Rhodium Group's China practice, told DW the threats to Germany's export model "have convinced Merz and his closest advisers that the benefits of action outweigh the costs of inaction" [5].

The shift is recent. The Epoch Times noted that France, Italy, the Netherlands, Spain and Lithuania backed tougher measures against China in May, while Germany's support came later [8].

What happens next

The Merz-Macron letter was timed to coincide with EU-China trade talks in Beijing last week [5]. IW foreign trade expert Jurgen Matthes wants faster measures: domestic reforms plus broad countervailing tariffs that could be implemented quickly [6]. He also urged the European Council to ask the Commission to develop a new trade instrument [6].

The Centre for European Reform has argued that Brussels should support European-built electric cars through consumer subsidies [4]. It opposes loosening the 2035 deadline for phasing out combustion engines [4]. The Commission has already approved the French eco-bonus as permissible state aid, and the CER calls it the most practical template for member states [4]. Germany has committed to reintroducing EV subsidies, while Italy and Spain are reviewing theirs next year [4]. The French model scores supply chains on carbon, which the CER says filters out Chinese-built models [4].

The IW projection assumes first-half trade trends continue through the rest of the year [6].