German Industry Pressures Merz to Adopt Tougher Stance on China

German industry is exerting growing pressure on Chancellor Friedrich Merz to adopt a tougher stance toward Beijing. Businesses are calling for stronger measures to address what they describe as unfair competition practices by Chinese rivals.

According to Reuters, Germany has long refrained from imposing trade barriers due to fears of Chinese retaliation. However, the increasingly hardline stance of industry representatives signals a shift in Germany's position. Berlin's approach will play a key role in shaping the European Union's overall trade policy, especially as the EU and China prepare for negotiations in October.

A June report by the Organisation for Economic Co-operation and Development (OECD) found that Chinese firms receive government support averaging three to eight times more than their counterparts in OECD countries, with subsidies accounting for nearly 60% of Chinese companies' global market share growth.

Germany's trade deficit with its largest trading partner, China, widened by approximately €22 billion last year, reaching €89.3 billion. This was driven by an 8.8% increase in imports compared to the previous year, while exports declined by 9.7%.

Volker Treier, DIHK's foreign trade chief, stated: "We must discuss with China what is currently happening. If it is confirmed that this is due to subsidies or unfair competition, then this is a problem."

This issue is particularly urgent for German automakers like Volkswagen, which have already been overtaken by local brands such as BYD in the Chinese market and now face pressure from Chinese competitors entering the European market.

Merz's coalition government has taken a harder line on China, but its messaging remains contradictory—calling for reduced economic dependence on China while still emphasizing its importance as a key economic partner.

Amid signs of internal disagreement within the coalition, Merz announced on the 26th that he has tasked his cabinet with developing strategies to address trade imbalances between the EU and China.

"We are noticing that even German industry seems to have changed its view on these global imbalances," Merz said, citing organizations such as the German Association of the Automotive Industry (VDA), which is reconsidering its previous opposition to protective measures.

Christian Bruch, CEO of Siemens Energy, stated in June that treating Chinese imports as equivalent to European products is "unacceptable," and emphasized the need for regulatory frameworks and local content quotas.

Treier of DIHK noted that sufficient tools exist within the World Trade Organization (WTO) and EU frameworks to protect European industries: "We just need to simplify and shorten the decision-making process when we decide to act."

The Federation of German Industries (BDI), representing major German manufacturers, advocates accelerating the use of existing trade policy instruments, including various safeguard measures, and methodological adjustments such as consolidating different product categories in anti-dumping and countervailing duty procedures.