China has regained its position as Germany’s top trading partner, surpassing the United States, according to recent data from the federal statistics agency Destatis. The total trade between Germany and China from January to September this year reached nearly 186 billion euros, slightly higher than the same period last year. In contrast, trade between Germany and the United States slowed by almost four percent to just under 185 billion euros.

This development reflects the impact of US tariffs on German exports to the US, as noted by ING economist Carsten Brzeski. The tariffs, which were introduced by President Donald Trump, have had a negative effect on German exports. Under a deal struck in July, EU exports to the United States face a baseline levy of 15 percent, significantly higher than before.

Despite this, the US remains Germany’s top export market, with a substantial trade surplus. However, Germany runs a trade deficit with China, which is a significant challenge for the country as it tries to reduce its economic reliance on China. The continued dependence on rare earths, semiconductors, and other input goods from China is particularly difficult for Germany, as China is increasingly perceived as a competitor rather than a trading partner.

This shift in trade dynamics comes as Germany’s economy is facing significant challenges, including meager growth and a substantial trade deficit with China. The country’s finance minister, Lars Klingbeil, is currently on a trip to China, marking the first visit by a representative of Germany’s ruling coalition to the world’s second-largest economy.

The significance of this development lies in the ongoing struggle of Germany to balance its economic ties with China, while also navigating the challenges posed by US tariffs. As the German economy continues to face significant headwinds, including a potential recession, the country’s ability to manage its trade relationships with major partners like China and the US will be crucial. Chancellor Friedrich Merz has vowed to revive the economy through a debt-fuelled spending blitz on defense and infrastructure, but the path ahead remains uncertain.