China shock drives widening trade deficit and industrial strain in Germany and the EU

The European Union’s goods trade deficit with China is expanding at roughly €1 billion per day, reaching a record €31.9 billion in April 2025. Germany, the bloc’s largest economy, has seen its long‑standing surplus with China turn into the widest deficit on record as Chinese exports of electronics, machinery and automobiles surge while German exports fall 25 % since early 2024. The surge has contributed to job cuts in the auto sector – Volkswagen has floated plans that could affect up to 100 000 workers – and a decline in Europe’s share of global car production from 25 % in 2019 to 18 % in 2025. Imports from China grew 8.8 % in 2025, pushing the bilateral trade deficit to €89.3 billion, while Chinese‑made cars accounted for 2.3 % of new registrations in Germany in 2025, rising to 3.7 % in the first half of 2026.

German economist Martin Gornig warned that “technology openness is the downfall of the German industry” and urged a shift toward niche specialisation and a competitive trade policy, including temporary anti‑dumping duties, to counter China’s market‑dominance. EU President Ursula von der Leyen stressed that “this is not just about cheap imports … we see overcapacities that erode our own manufacturing base.” The analysis highlights the growing pressure on German and European manufacturers and the policy debate over how to protect strategic sectors such as batteries, robotics and advanced machinery.