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USA overtakes China as Germany’s largest trading partner

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USA overtakes China as Germany’s largest trading partner

Germany’s largest trading partner: China is losing, the USA is gaining in importance. Picture Alliance

German foreign trade with China is shrinking. However, with the USA it is increasing. As a result, the USA could replace China as Germany’s largest trading partner this year.

This emerges from the new ranking of German foreign trade, which the Federal Statistical Office published on Wednesday.

It reflects the major upheavals in world trade as a result of recent wars and conflicts. With a view to the US elections in the fall, the figures for Germany contain a warning.

The USA can overtake China as Germany’s most important trading partner this year. This is based on new figures Federal office of statistics on German foreign trade. They show the enormous upheavals in world trade as a result of the crises, wars and new conflicts of the 2020s. The consequences for Germany go far beyond the raw trade figures.

China’s importance for German companies had increased dramatically since the beginning of the millennium. China’s rise is closely linked to a phase of strong economic growth in Germany too. German companies benefited from the huge Chinese market, and companies and consumers benefited from cheap imports. Eight years ago, China finally overtook the USA as Germany’s largest trading partner.

But in 2023, China’s lead over the USA has shrunk drastically. Germany’s total trade with China, i.e. the sum of imports and exports, amounted to 253 billion euros. That was only 0.7 billion euros more than trade with the USA. A year earlier the gap was over 50 billion euros.

There are two trends behind this: German trade with China is shrinking, while it is growing with the USA. Germany’s exports to China fell by nine percent to 97 billion euros in 2023. Imports from China even fell by 19 percent to 156 billion euros. Overall, the trade volume shrank by 15.5 percent, with a high German trade deficit with China.

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The development with the USA is different. Germany’s trade with the United States increased by a good one percent in 2023 despite the general economic downturn. The USA is the largest economy in the world and, since 2015, also the most important single market for export goods “Made in Germany”. Last year, German exports to the USA increased by one percent to 158 billion euros. In contrast, there were imports from the USA worth 94.4 billion euros. So Germany makes a significant surplus in trade with the USA.

Even in the last months of 2023, German foreign trade with China developed weaker than with the USA. A trend reversal is not in sight. It is therefore likely that the USA will overtake China this year.

The state foreign trade company Germany Trade and Invest (GTAI) writes in a study: “China’s dominant position in foreign trade with Germany is crumbling.” The main reason is the weaker growth in China. “The real estate crisis, geopolitical risks in relation to the USA and weakening industrial investments contribute to this.”

Another factor is that German companies want to become more independent from China. One reason is bad experiences with delivery bottlenecks when China imposed rigorous lockdowns and completely closed ports during the corona pandemic. In response to China’s threats against Taiwan, Germany is also trying to reduce its dependence on important raw materials, intermediate products and also medicines. This is also a lesson from the energy crisis after Russia’s attack on Ukraine, when Russia abruptly stopped its gas deliveries to Germany. A third factor is that German companies are increasingly producing in China instead of exporting goods there.

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Germany’s largest trading partner? In reality, the European Union

Foreign trade is of paramount importance for Germany as an export nation. Hardly any other country in the world is closely linked to other economies. Compared to other countries, a larger part of Germany’s prosperity depends on the exchange of goods with other countries.

As in previous years, the Netherlands is in third place among Germany’s largest trading partners, with exports and imports totaling 215 billion euros (minus 5.5 percent). If you only look at German exports, both France (117 billion) and the Netherlands (112 billion) ahead of China. Overall, the following applies anyway: German companies do most of their business with the countries of the European Union. The German trade volume within the EU internal market far exceeds trade with China and the USA.

In contrast, after the attack on Ukraine, Russia completely lost its role as a relevant trading partner for Germany. German exports to Russia fell by a further 39 percent to almost nine billion euros in 2023. Imports collapsed by 90 percent to 3.7 billion euros. Until the second half of 2022, Russia was still an important energy supplier for Germany. Then Russia stopped gas deliveries to Germany, which in turn stopped importing oil and coal from Russia.

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Export surplus increased significantly

Germany’s most important export product in 2023 was still cars and vehicle parts with a value of 268 billion euros. This was almost nine percent more than in the previous year. This was followed by other industrial products such as machinery (223 billion) and chemical products (141 billion).

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In total, Germany exported goods worth 1,562 billion euros in 2023, two percent less than the year before. Imports fell even more significantly by ten percent to 1,353 billion euros. This was mainly due to lower energy prices. The export surplus rose to 209.6 billion euros, after 88.6 billion euros in the previous year. At that time, the high import prices for energy in particular dampened the balance sheet.

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For years, Germany has been exporting more than it imports. This repeatedly caused criticism from trading partners. Both also apply to the exchange of goods with the USA. Unlike trade with China, Germany has a large export surplus with the USA. Former US President Donald Trump sharply criticized this during his time in office and repeatedly threatened to impose tariffs on German products. In several cases, trade conflicts could only be averted or limited with difficulty. It is likely that Trump will run again in the presidential election in November – with a chance of returning to the presidency of Germany’s most important trading partner.

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