Deindustrialisation angst grips Germany.
In a new study, Brad Setser and I unpack how badly Germany's trading relationship with China has backfired, and how its industry might weather the second China shock.
With terrific accompanying reporting in Handelsblatt/FT.
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https://www.cer.eu/publications/archive/policy-brief/2025/how-german-industry-can-survive-second-china-shock
In a new study, Brad Setser and I unpack how badly Germany's trading relationship with China has backfired, and how its industry might weather the second China shock.
With terrific accompanying reporting in Handelsblatt/FT.
1/
https://www.cer.eu/publications/archive/policy-brief/2025/how-german-industry-can-survive-second-china-shock
Comments
But measures - most of which are within the WTO rules - to level the playing field with China.
Germany also needs new markets. Bulldozing Mercosur through is a great move by UvdL.
So an effective strategy both for Washington and Berlin requires partners!
Germany just confirmed its two-year economic downturn, held back by the malaise in manufacturing, good for ~20% of GDP and 5.5M jobs. And China just clocked a $1tn annual trade surplus.
The two trends are clearly interrelated.
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China’s macro-imbalances now directly impinge on German interests.
In the '10s China's real estate sector absorbed excess savings but...
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The result: a (pretty violent) turn back toward export-led growth.
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German (and EA) exports lagged, and German exports in capital and durable goods shrank.
But in some ways the sectoral data tell the story more compellingly.
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China was not a net exporter of vehicles in '20. It now exports 5 million more vehicles than it imports. The comparable number for Germany: 1.2m, down by half from peak.
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While global trade in greentech is rapidly expanding, China is curbing its imports (dotted red) even as its exports (red) soar.
(geeky me thinks 'tis a good novel chart)
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