Taps Coogan – February 16th, 2023

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Decades of trying to court the Chinese market have finally ‘paid off’ for Germany and delivered exactly what similar efforts delivered for the US and others, a swelling bilateral trade deficit. Via Holger Zschaepitz:

As Holger Zschaepitz notes, in 2022, Germany’s imports from China surged 33% while its exports grew just 3%, leading to the largest overall German trade deficit since WWII.

Over the past twenty years. Germany has been particularly eager to court the Chinese market, not only for the same misguided reason as everyone else (tapping a huge market), but as a way to reduce US economic preeminence – seemingly Germany’s primary geopolitical instinct.

With consumer buying habits changing drastically since 2020 and energy costs prohibitively high, German industry hasn’t stood much of a chance against lower-wage, larger, profit-indifferent, state-linked Chinese companies. Add in the fact that Germany has been a surprising laggard in converting its all-important auto sector to EVs. Indeed, Tesla, Fiat, and Peugeot are all outselling German brands in Europe.

The extra irony for Germany is that German exporters were the main beneficiary of the dynamic whereby EU integration eliminated trade barriers and created a ‘winner takes all’ environment that greatly benefited larger German companies. If anyone should have known what flattening trade barriers with a vastly larger market would bring, it should have been them.