China is no longer Germany’s largest trading partner

Germany and China’s close economic relationship is reaching a turning point. The estimated trade volume between Germany and various countries in 2024 shows that China has fallen from the top for the first time in nine years, and the United States has taken its place. The sharp drop in automobile-related exports has had a negative impact on competition with Chinese companies. German companies will explore adjustments to business strategies such as supply chains.

The German Federal Foreign Trade and Investment Agency (GTAI), an agency under the German government, made independent estimates based on trade statistics from January to November 2024.

As of 2023, China has been Germany’s largest trading partner for eight consecutive years, and the reversal with the strong economy of the United States also reflects the shrinking domestic demand in China. The German Federal Foreign Trade and Investment Agency pointed out that “China’s importance in trade is declining.”

Looking at Germany’s trade volume by country, the United States ranks first with 255 billion euros, an increase of 0.8% over the previous year. China is second with 247 billion euros, a decrease of 2.9%. In particular, Germany’s automobile-related exports are sluggish, and the intensified competition with Chinese companies that have risen in areas such as pure electric vehicles (EVs) has had a negative impact.

Volkswagen Group, a German auto giant, will see its new car sales in the Chinese market fall by 10% to 2.92 million in 2024. Mercedes-Benz Group’s passenger car sales also fell by 7% to 680,000, and it is struggling. Against the backdrop of progress in localized production, exports, including parts, are likely to fall.

The Scholz government formulated its first diplomatic strategy for China in 2023. While maintaining a certain economic relationship, it proposed a policy that “it is necessary to change the way of dealing with China.” From the perspective of risk management, it calls on German companies to avoid over-reliance on China.

According to data from the German Federal Foreign Trade and Investment Agency, in Asia, imports from Vietnam have increased, and “German companies are also changing their strategies regarding the Chinese market, and the trend of looking for alternatives is in full swing.” The Scholz government is strengthening its involvement in the Indo-Pacific region and will promote cooperation in the field of economic security with Japan.

Uncertainty about the outlook is increasing. With the United States, which has become Germany’s largest trading partner, exports are larger, not imports. The growth in exports to the United States has supported the German economy, which has been plagued by economic downturn, but on the other hand, with the Trump administration in the United States coming to power, which has proposed a high tariff policy, there is a possibility of being involved in trade frictions.