Balance sheet shows record deficit: German trade with China is becoming increasingly one-sided

At the beginning of the week, Chancellor Merz and French President Macron publicly considered excluding unwanted trading partners from the European market if necessary. The German foreign trade figures show why China is the focus: the imbalance is growing unabated.

Since March 2020, Germany has not received more goods from any other country in the world than from China. The country continues to top the import list to this day. It was at the forefront when the value of imports reached its all-time high of 17.8 billion euros in April 2022. And even when imports reached a temporary low in January 2024, the People's Republic remained the leader.

Previously, Europe had begun to gradually reduce its dependence on its system rival. “We want to reduce dependencies in critical areas in order to reduce the risks they pose,” explained the Foreign Office in 2023. As a result, however, imports rose again and reached their second highest value ever last month.

The direction in which the German-Chinese trade relationship is developing becomes even clearer when imports from China are compared to German exports: in 2019, the monthly deficit in trade with China was at times under one billion euros. In August 2026 it reached a record of 10.9 billion euros. This is the second time this year that the deficit has exceeded the ten billion euro mark. German companies sold 4.7 percent more to China in August than in July. But over the entire year so far, exports have shrunk by 12.9 percent compared to the same period last year. Imports from China, on the other hand, rose by 10.1 percent.

The Federal Government and the EU recently openly justified this development with unfair trading practices by the Chinese. They spoke of overcapacity, market-distorting subsidies or unequal access to trading venues. At the beginning of the week, Chancellor Friedrich Merz and French President Emmanuel Macron wrote a letter to the EU Commission: They want to allow it to take faster and tougher action against trade distortions. They even suggested completely blocking the European market from third countries if they prevented fair competition conditions and severely distorted the internal market.

German companies are investing billions in China

There are also upper limits for the import of critical raw materials and goods from individual countries. Merz and Macron do not name China in their letter. But the move comes in the middle of negotiations with Beijing over the growing trade imbalance. EU Trade Commissioner Maros Sefcovic said he wanted to make progress on the ground to reduce the EU's "unsustainable" trade deficit with China. The threatened market blockage could help to achieve concessions in these talks.

Germany's competitive disadvantage and China's growing dominance are not only reflected in trade between the two countries. German car manufacturers, mechanical engineering companies and chemical companies are also fighting Chinese competition in other markets. High US tariffs are increasing the pressure. Goods that would previously have ended up on the U.S. market are competing with German exports in Europe and elsewhere. Where Chinese suppliers win buyers, German companies lose out in case of doubt. China's market power has a direct and indirect influence on Germany's export balance.

Despite this pressure, the federal government raised its economic forecast for this year. She justified this, among other things, with positive impulses from the export business. Experts see precisely this as a reason for cautious optimism at best.

The foreign trade balance shows China's importance for the German economy - but not the whole picture. Volkswagen, BASF and other German companies are expanding their local plants, some of them massively. They are increasingly producing “in China for China”. These transactions do not appear in the German foreign trade balance because the goods remain local. According to the German Economic Institute (IW), German companies invested 5.6 billion euros in China in the first half of this year - a similar amount to the same period last year. If they wanted to survive on the Chinese market, the companies would have little other choice, writes the IW.