Germany’s Trade Landscape Shifts as US Tariffs Bite
German exports to the United States experienced a significant decline in 2025, falling by 9.3 percent, as President Trump’s tariffs took effect. This downturn contributed to a four-year low in Germany’s trade surplus with the US, reaching €52.2 billion. Although overall exports saw a slight rebound – around one percent – driven by increased trade within Europe, the impact of US tariffs is undeniably reshaping Germany’s trade relationships.
The Impact of Trump’s Tariffs
The introduction of a 15 percent baseline levy on EU exports to the US in July proved particularly damaging. Sectors like automotive, machinery, and chemicals bore the brunt of the impact, with exports of German cars and car parts to the US dropping 17.5 percent between January and November. Commerzbank economist Ralph Solveen noted that the higher tariffs are directly impacting the competitiveness of German goods in the US market.
China Reclaims Top Trading Partner Status
As a result of the shifting trade dynamics, China has once again become Germany’s largest trading partner, surpassing the United States. While German exports to China also decreased (9.3 percent in 2025), the overall trade volume remains substantial. Simultaneously, Chinese exports to Germany increased by nine percent, potentially due to redirection of goods as Trump imposed tariffs on Chinese imports.
A Broader Economic Picture
Despite the challenges in key markets, Germany’s overall trade surplus narrowed to €200.4 billion in 2025, a reduction of approximately €40 billion from the previous year. Factory output experienced a temporary setback in December, falling 1.9 percent, but economists like Carsten Brzeski of ING remain optimistic, suggesting it’s a temporary halt rather than a new downward trend.
Germany Looks to Diversify
The changing trade landscape is prompting Germany to explore alternative markets. Chancellor Friedrich Merz recently visited the Gulf region, signaling an effort to reduce reliance on the US market. Merz expressed optimism about Germany’s economic trajectory, emphasizing ongoing reforms aimed at improving investment and job creation.
Sector-Specific Challenges
German businesses operating in China face increasing competition from domestic rivals and subdued consumer demand. Still, trade with other EU countries has provided a buffer, with exports rising around four percent in 2025. This highlights the importance of strengthening intra-European trade relationships.
Expert Insights
“Germany is wondering right now if it has to be preparing for an attack by its most essential NATO ally,” Rachel Tausendfreund, an American researcher at the German Council on Foreign Relations (DGAP), stated, reflecting the broader geopolitical concerns impacting trade relations.
Did you know?
Germany’s trade surplus with the US reached a record high the year before the new tariffs were implemented, demonstrating the significant impact of the policy change.
FAQ
Q: What caused the decline in German exports to the US?
A: Higher US tariffs imposed by President Trump significantly increased the cost of German goods, making them less competitive in the US market.
Q: Is Germany’s economy in recession?
A: While Germany has faced economic challenges, recent data suggests a potential turnaround, and the government expects one percent growth in 2026.
Q: What is Germany doing to address the trade imbalance?
A: Germany is actively diversifying its trade partners, exploring new markets like the Gulf region, and focusing on strengthening trade within Europe.
Q: What impact did the tariffs have on specific industries?
A: The automotive, machinery, and chemical industries experienced significant declines in exports to the US.
Pro Tip: Businesses exporting to the US should carefully review tariff regulations and consider strategies to mitigate the impact of increased costs, such as adjusting pricing or diversifying product offerings.
Read more: Merz heads to Gulf as Germany looks to ease reliance on the US
Read more: Six things to know about Germany’s job market in 2026
What are your thoughts on Germany’s shifting trade landscape? Share your insights in the comments below!
