Germany Pivots to Stricter EU Trade Defenses as Chinese Import Pressure Mounts

Germany’s longstanding reluctance to confront Beijing over trade disputes appears to be dissolving, replaced by a growing willingness to enforce tougher European Union defenses. For years, Berlin resisted hardline measures against what the EU characterizes as China’s unfair trade practices, driven primarily by fears that retaliation would damage German exporters. However, recent months have seen a decisive shift in strategy.

Last week, Chancellor Friedrich Merz and French President Emmanuel Macron sent a joint letter to European Commission President Ursula von der Leyen urging the creation of a new mechanism to exclude trading partners from the EU’s single market if they persist in unfair practices. While not explicitly naming China in the letter, the measure was clearly aimed at Beijing, warning against countries that deliberately undermine fair market conditions through political or economic coercion.

The diplomatic move came as China’s Commerce Ministry issued a sharp rebuke, stating that Europe would “suffer the consequences” should it proceed with what it termed a “kill-switch” plan. The warning coincided with crucial trade negotiations between the EU and China held in Beijing.

Experts suggest this policy pivot is driven by the urgent need to protect Germany’s export-driven economy. Noah Barkin, a senior adviser at the Rhodium Group, told DW that the threats facing Germany’s industrial base have convinced Merz and his inner circle that the benefits of taking action now outweigh the risks of doing nothing.

Historically, the German and Chinese economies rose in tandem, with German industry capitalizing on China’s rapid growth. That dynamic has reversed significantly since the COVID-19 pandemic. According to data from Germany Trade & Invest, China has dropped from being Germany’s second-largest export market to ninth as of the first half of 2026.

Chinese competitors have rapidly closed the technological gap while benefiting from lower production costs and substantial state subsidies. This pressure is acutely felt in Germany’s core industries, including automotive manufacturing, precision engineering, and chemicals.

The automotive sector, once a linchpin of bilateral trade, has suffered severe losses. German car exports to China fell by 66% between 2022 and 2025, according to Rhodium Group data. Domestically, the impact is equally stark: imports of Chinese-made vehicles surged by 121% in the first seven months of the year, accounting for nearly 14% of total vehicle imports, per the federal statistics agency Destatis.

Major German brands such as Volkswagen, Audi, and Porsche have announced workforce reductions totaling tens of thousands of jobs as they navigate this transformation. Andreas Mischer, an associate fellow at the Mercator Institute for China Studies (MERICS), noted that the rivalry is now hitting German automakers within their home European market, adding to the pressure on Berlin to adopt stronger trade defense instruments.

Industrial leaders have become increasingly vocal. Oliver Richtberg, head of foreign trade at Germany’s mechanical engineering association VDMA, told Welt am Sonntag in August that companies are no longer willing to accept what he described as deindustrialization through unfair measures. The EU’s goods deficit with China reached approximately €360 billion ($402 billion) last year, equating to roughly €1 billion per day, a figure that widened again in the first half of 2026.

While Brussels has attempted to combat the dumping of cheap Chinese goods, broader industrial protection proposals face resistance. The EU’s proposed Industrial Accelerator Act, intended to attract manufacturing investment back to Europe, has been criticized by some business groups. The European Automobile Manufacturers’ Association (ACEA) argued that the draft act does little to counter cheaper Chinese rivals, emphasizing that incentives for local production must offset higher European costs.

A significant concern for Berlin is China’s dominance over rare earth minerals and magnets, which are vital for German automotive, renewable energy, and defense industries. Unnamed German officials told Bloomberg that a new EU kill-switch could serve as a “second-strike weapon” if Beijing restricts these critical exports.

In an effort to avoid an outright trade war, the EU and China reached a “shared understanding” during recent talks in Beijing. This agreement could reduce Chinese exports of hybrid and plug-in hybrid vehicles to the EU by more than half, potentially affecting several million vehicle exports over the coming years. EU Trade Commissioner Maros Sefcovic, who led the European delegation, highlighted the significance of the deal.

Data from ACEA indicates that hybrid-electric cars comprised nearly 37% of all new registrations in the EU from January to August. Meanwhile, MERICS calculated that the EU remains a more critical export destination for China than the United States, with exports to the EU reaching $254 billion in the first half of the year compared to $172 billion to the US.

Mischer observed that this trade imbalance provides EU negotiators with considerable leverage, allowing them to protect European industry while seeking to avoid direct confrontation. “The EU has more leverage than it sometimes thinks,” he said.