Germany turns to the US as primary trade ally

According to Reuters' analysis of the German Federal Statistical Office data, the United States emerged as Germany's primary trading ally in the first quarter of 2024, surpassing China.

From January to March'24, the total trade volume between Germany and the United States, encompassing both exports and imports, surged to a remarkable €63 billion ($68 billion). This substantial increase, surpassing Germany's trade with China, highlights the burgeoning economic ties between the two nations and the profound shift in Germany's trade focus.

China remained Germany's foremost trading partner for the eighth consecutive year in 2023. Trade volumes between the two nations surged to €253 billion, edging slightly ahead of the United States by a margin of just a few hundred million euros.

Commerzbank economist Vincent Stamer explained, "German exports to the U.S. have now risen further due to the robust economy there, while both exports to and imports from China have fallen. Structural reasons are also a factor."

"China has moved up the value chain ladder and is increasingly producing more complex goods, which it used to import from Germany. In addition, German companies are increasingly producing locally instead of exporting goods from Germany to China."

Germany expressed concerns over political disparities and decried "unfair practices" in its inaugural China strategy last year, declaring its intention to diminish ties with Beijing. However, Berlin has been ambiguous regarding specific measures to lessen interdependencies.

According to Juergen Matthes of the German economic institute IW, imports of goods from China to Germany experienced a nearly 12 per cent decline year-on-year in the first quarter. In contrast, exports of goods to China saw a decrease of just over 1 per cent.

Juergen Matthes said, "The fact that the Chinese economy is performing worse than many had hoped, while the U.S. economy is exceeding expectations, is presumably contributing to this."

Matthes stated that German goods exported to the United States now constitute approximately 10 per cent, whereas China's portion has dwindled to less than 6 per cent.

"With a clear global economic headwind for the German economic model, a reorientation - also geopolitically motivated - seems to be taking place: away from system rival China and towards transatlantic partner U.S.,” Matthes added.

It remains to be seen whether this trend will persist. China stands as the foremost global producer of aluminium and steel, while Germany boasts Europe's most significant industrial economy. Notably, German automakers heavily rely on the Chinese market.

Dirk Jandura, the President of the BGA Trade Association, said, "If the White House administration changes after the U.S. elections in November and moves more in the direction of closing off markets, this process could come to a standstill."