Germany backs new EU measures against China’s trade practices

Germany, long the EU member most reluctant to pick fights with its largest trading partner, just picked a fight with its largest trading partner.

Chancellor Friedrich Merz announced on September 15 that Germany will support new European Union measures targeting what he called China’s “unfair” trade practices. The list of grievances is long: heavy state subsidies, industrial overcapacity, aggressive pricing strategies, and maintaining an undervalued currency.

The numbers behind the pivot

Germany’s trade deficit with China hit €90 billion in 2025, a figure that has quadrupled since 2020. Germany went from running a surplus with China before the pandemic to watching imports balloon to €170.6 billion while exports limped along at €81.3 billion.

German manufacturing has been absorbing the consequences in real time, with reports indicating the sector is losing roughly 10,000 jobs per month due to Chinese competition.

A survey by the DIHK, Germany’s association of chambers of commerce, polled approximately 1,300 German firms and found that more than half support tougher EU action against China. The notable part: they back these measures even knowing they could face higher costs or retaliatory measures from Beijing.

What Berlin is actually planning

Germany isn’t just offering rhetorical support for EU-level action. The government is actively drafting a comprehensive economic-security package that includes new tariffs on imports like Chinese plug-in hybrid vehicles, mandatory joint venture requirements, enhanced investment screening mechanisms, and stricter export controls. Cabinet approval is anticipated by October 14.

At the EU level, policymakers are considering what’s been dubbed an “overcapacity instrument” alongside faster anti-dumping procedures. The overcapacity instrument would give Brussels new tools to respond when a trading partner floods European markets with goods produced under state-subsidized conditions.

Merz and French President Macron are reportedly coordinating on emergency trade proposals ahead of an upcoming EU leaders’ meeting. Merz has publicly criticized China’s model of combining market dynamics with extensive state intervention, framing it as a system that creates fundamentally unfair competitive conditions for European firms operating without comparable government support.

Why this shift matters beyond trade

Germany’s pivot carries weight precisely because it was so long in coming. Berlin’s previous reluctance to confront Beijing on trade gave other EU members political cover to avoid the issue. With Germany now aligned with France and the European Commission, the coalition pushing for action represents the EU’s economic center of gravity.

Sectors heavily dependent on Chinese imports, particularly automotive and industrial machinery, face potential cost increases from new tariffs and supply chain restructuring requirements. Mandatory joint ventures could reshape how European companies operate in China, adding complexity and potentially reducing margins.

The risk of Chinese retaliation adds another variable. Beijing has historically responded to trade pressure with targeted measures aimed at the aggressor’s most vulnerable export sectors. For Germany, that could mean restrictions on automotive exports or reduced access for German industrial firms operating in China.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.