NewsUS overtakes China as Germany's top trade partner amid shifting global dynamics

US overtakes China as Germany's top trade partner amid shifting global dynamics

President of the United States Joe Biden and Chancellor of Germany Olaf Scholz
President of the United States Joe Biden and Chancellor of Germany Olaf Scholz
Images source: © Getty Images | 2022 Getty Images
12:23 PM EDT, May 11, 2024

According to foreign media reports, in the first quarter of 2024, the United States surpassed China in trade turnover with Germany, becoming Germany's most significant partner.

China has lost its position as Germany's largest trading partner to the United States. Trade between the US and Germany in the early part of the year reached 68 billion USD, outstripping the trade volume with China, which stood at approximately 65 billion USD, based on German Federal Statistical Office data.

For the past eight years, China was at the forefront as Germany's main trading ally. So, what led to this shift in dynamics?

Commerzbank economist Vincent Stamer shared with Reuters that the resurgence of the American economy fuels the growth in German exports to the US. On the other hand, trade flows between Germany and China are dwindling as China begins to produce more sophisticated goods than it previously imported from Germany. Additionally, many German corporations are establishing production bases in China, reducing the need to export goods from Germany to China.

Allianz Trade analysts observe that China and Germany are increasingly vying in the same sectors, with Chinese competition threatening German leadership in crucial export markets. Moreover, Germany is becoming more reliant on Chinese imports, which signals potential challenges for Germany's trade dynamics despite the German Chancellor's recent visit to China.

Easing ties with China

The European policy towards "de-risking" also steers Germany's trade relationship away from China. CNBC reports that this strategy aims to bolster Europe's resilience and security by diminishing economic dependencies on China.

A study from the German Ifo Economic Institute highlighted by CNBC shows a decrease in firms claiming dependence on China—from 46 percent in February 2022 to 37 percent in February 2024.

The dynamics of US-China relations are crucial in this context. It's worth recalling that the trade conflict initiated by former President Donald Trump in 2018, which focused on tariffs on Chinese exports and other trade issues, remains a pivotal factor in the evolving global trade landscape.

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