Germany weighs China risks in new trade era

DW Christoph Hasselbach  February 23, 2026   

Chancellor Friedrich Merz is traveling to China for a belated inaugural visit. A lot is at stake as Germany is in search of global partners after the US has relinquished much of its longstanding role.  There is no shortage of gloomy assessments of the global situation at the moment. "In the era of great powers, our freedom is no longer a given. It is under threat," said German Chancellor Friedrich Merz at the opening of the Munich Security Conference earlier in February.  Merz explicitly mentioned China. "China has the ambition to shape global affairs, laying the foundations for this over many years with strategic patience. In the foreseeable future, Beijing could draw level with the US in terms of military might.

China is systematically exploiting the dependencies of others, reinterpreting the international order on its own terms," he said.  The chancellor no longer sees the United States as a reliable partner. In Munich, Chinese Foreign Minister Wang Yi offered the very things that the German government feels are lacking in Donald Trump's America: multilateralism, a rules-based world order and free trade. In this, Merz seems to see an opportunity. Merz is now to visit China, departing Germany on February 24, on the invitation of Chinese Premier Li Qiang. Before leaving on what is his first trip to China since becoming chancellor in May 2025, Merz said he would be discussing "strategic partnerships" in China. 

But how promising is China's offer? "Not everything China wants is automatically in Germany's interests. That will have to be discussed and negotiated,” Eberhard Sandschneider, a China expert at the Free University of Berlin, told DW.

The old business model no longer works

A large business delegation is travelling with Merz. China overtook the US to become Germany's most important trading partner, with a volume of over €250 billion ($294 billion) in 2025.

But Germany's trade with China has changed significantly. Germany's trade deficit reached a record high in 2025, amounting to around €90 billion according to estimates by the German Economic Institute. This represents an increase of €30 billion over 2024 alone.

In a recent government statement to the Bundestag, Merz spoke of a "growth gap" with China and emphasized that Germany must become more competitive.

Until a few years ago, for example, the German automotive industry was very successful in serving the Chinese market. However, since the transition to electric cars in both countries, the old business model is no longer viable: most large German electric cars are too expensive in China, while China exports incomparably cheaper vehicles to Europe.

"We have been resting on our laurels for too long," says Sandschneider. "We Germans are proud that we build cars and not mobile phones on wheels, as an automotive manager once said. But that is exactly what the Chinese are building, and that is exactly what makes them successful." China has now become "a technological leader," he added. "Keeping up with that will not be easy."

Rare earths leave Germany heavily dependent

The previous government under Olaf Scholz had already decided to reduce dependence on China. China has a near-global monopoly on some raw materials, especially rare earths, which are needed for electric cars, among other things. China's export restrictions on rare earths even led to temporary production stoppages at German car manufacturers in 2025. In addition, experts see security risks posed by Chinese access to data, for example, via communication networks. The US government has also warned against such dependencies. In Munich, Secretary of State Marco Rubio called on European allies to rally behind the US. Eberhard Sandschneider sees dangers in the development of a bipolar world in which the US could demand that Germany choose between it and China. "That puts other countries, not just Germany, in a difficult bind," he said.

Merz's first visit is long overdue

During his visit to China, Friedrich Merz plans to call on President Xi Jinping to stop supporting Russia's war in Ukraine.  Eberhard Sandschneider believes this is futile: "Anyone who has failed to understand that China's geostrategic interest consists in not losing Russia would do well to sit down and think things through. The German chancellor, whose visit to China is anyway long overdue, will not succeed in this."  The fact is that Merz's inaugural visit is late in the game, in two senses: late after taking office in May 2025, having previously visited a whole series of other countries, including India.  But also late because other Western heads of state and government have been to China in recent months, including French President Emmanuel Macron, British Prime Minister Keir Starmer and Canadian Prime Minister Mark Carney. They had the same goal that Merz is now pursuing: to gain new economic policy leeway with China's help, which the US had previously restricted. Merz actually wanted to a German delegation to visit China last October, but diplomatic tensions got in the way. Foreign Minister Johann Wadephul accused China of aggression in the Pacific region. He then canceled his visit to China on short notice when it became clear that no important partners would be made available for him to meeting with other than his counterpart Wang Yi. The cancellation was very poorly received in Beijing. But Merz has not minced his words either. "Suddenly we see China aggressively expanding bases in the South China Sea, encircling Taiwan and openly declaring that it would be prepared, if necessary, to use military force to bring about the so-called reunification of China," he said recently, referring to Taiwan, which China considers a renegade province. This comment came just a few days before Merz's departure for China. It will be interesting to see whether his criticism casts a shadow over the visit.

This article was originally published in German.