Commentary: Merz Recalibrates Germany’s China Strategy Amid Industrial Shifts

1. Germany, despite not being a permanent member of the United Nations Security Council, is currently the world’s third-largest economy and serves as the primary driving force of the European Union. In the context of the continent's largest land war in decades, Germany is experiencing significant transformation as it adapts to new realities in both its domestic and foreign policy landscapes [para. 1].

2. Germany’s influence in global affairs is expanding, notably through its participation in the E3 (Germany, Britain, and France) as the core of European security initiatives, as well as its involvement in international negotiations such as the Iran nuclear talks [para. 2].

3. The country is grappling with internal challenges, including debates over migration, increasing tensions within the Western alliance that has persisted for 80 years, and facing industrial competition from rising economies like China. Friedrich Merz, leading the center-right Christian Democratic Union, is steering Germany through a process of strategic recalibration to address these issues [para. 3].

4. A notable milestone in Merz’s leadership is his first official visit to China, aligning with the Lunar Year of the Horse, which is indicative of Germany’s renewed approach to international engagement [para. 4].

5. Nevertheless, Merz faces a complex and demanding journey, as Germany’s transition is beset by compounded domestic and international challenges [para. 5].

6. At the start of 2026, Merz opted to visit India first for his diplomatic outreach, highlighting Germany’s growing attention to major Asian economies beyond China [para. 6].

7. Following his China trip, Merz plans a second visit to the United States during his chancellorship, underscoring the significance of U.S.-Germany ties [para. 7].

8. Germany’s strategic approach is now characterized by balancing relations among major powers and avoiding overreliance on any single market, which is increasingly common among middle powers [para. 8].

9. Merz’s two-day China visit focuses on economic and cultural cooperation, with a specific emphasis on China’s emerging industries. Compared to the British Prime Minister’s (Keir Starmer’s) visit, Merz’s itinerary is noted for its greater depth and breadth [para. 9].

10. Historically, German businesses were leading players in China’s market, especially in vehicles, chemicals, and machinery. The Merkel era is remembered as a strong period for China-Germany relations, guided by the principle that mutual prosperity would benefit both countries [para. 10].

11. However, the ascent of Chinese industrial capabilities and fierce competition in new sectors have undermined the era of exceptional German success in China. Complementarity persists, but exclusivity has diminished and competition has increased [para. 11].

12. In 2025, bilateral trade between Germany and China reached €253 billion ($298 billion), up 2.7% from the previous year. However, the trade deficit expanded dramatically, as German imports from China reached €171.2 billion and exports to China were only €81.8 billion, resulting in a deficit rising from €20 billion in 2024 to €87 billion in 2025 [para. 12].

13. German authorities are concerned about the influx of Chinese industrial goods, which they estimate is costing Germany at least 10,000 industrial jobs per month [para. 13].

14. Officials also cite issues such as Chinese industrial overcapacity, unfair subsidies, export restrictions on critical raw materials, and China’s positioning on the Russia-Ukraine war as warning signs, marking a pivotal turn in the bilateral relationship [para. 14].

15. Germany’s China policy, more complex than other European countries’ approaches, is influenced by robust debate among various stakeholders [para. 15].

16. For example, Germany’s automotive industry, which maintains a strong presence in China, is apprehensive about Chinese new-energy vehicles but recognizes the indispensability of the Chinese market. Despite Germany’s opposition, the EU’s anti-subsidy tariffs on Chinese electric vehicles were approved by the majority [para. 16][para. 17].

17. Despite escalating tensions, the vast Chinese market remains a strong lure for German and other Western businesses [para. 18].

18. While Europe pursues “de-risking” its supply chains, China’s longstanding development has made it nearly indispensable in global industry, preventing most countries from completely bypassing it [para. 19].

19. Chancellor Merz maintains a traditional Atlanticist perspective, contrasting with leaders like Emmanuel Macron and Mark Carney, and remains committed to German-U.S. and Euro-Atlantic relations even amidst transatlantic strain [para. 20].

20. This position mirrors the dominant attitude among Western politicians during the Trump presidency [para. 21].

21. Under Merz, Germany upholds its tripartite stance on China, viewing the country as a “partner, competitor, and systemic rival,” with the relative emphasis among these roles likely to shift based on evolving circumstances [para. 22][para. 23].