In 2025, Germany’s export-driven economy faced simultaneous pressure from its two largest trading partners, according to a report from the German Economic Institute (IW). Trade data showed shipments to the United States fell sharply while exports to China also weakened, pushing Germany towards a record trade deficit with China of almost EUR90 billion.

Read also: China’s Trade Surplus Hits $1 Trillion Despite U.S. Tariffs

Transatlantic Trade Under Strain

The IW study, funded by the Federal Foreign Office, states, “The close transatlantic trade relationship is coming under significant strain due to US President Trump’s tariff policy.” It notes this is already reflected in export performance during the first three quarters of 2025.

German exports to the United States fell by 7.8% in the first three quarters of 2025 compared with the same period a year earlier. This marks a sharp reversal from the average annual growth of nearly 5% recorded between 2016 and 2024.

Industrial Heart Hit Hard

The decline was concentrated in key industrial sectors. “German exports of motor vehicles and parts, machinery and chemical products — together accounting for more than two-fifths of German exports to the US — are particularly hard hit,” the study stated. Combined, these three sectors alone dragged German exports to the US down by more than 5.2 percentage points compared with the previous year, representing more than two-thirds of the overall decline.

The collapse was driven largely by President Donald Trump’s renewed tariff offensive after his return to office. German automotive exports to the US fell by 14%, while machinery exports dropped by 9.5% as tariffs of up to 50% were imposed on steel, aluminium and related products.

A ‘New Normal’ for Trade

The report warned that, since US import tariffs are unlikely to return to previous levels anytime soon, export performance in the third quarter of 2025 may reflect a “new normal” for German trade with the United States. In important industries, German exports to the US have been pushed back to levels seen in 2022 or even early 2019.

While overall German exports rose slightly in nominal terms during the first three quarters of the year, the study makes clear this masks a worrying loss of competitiveness, with export volumes in key sectors pushed back several years.

Authored by Dr. Samina Sultan, senior economist at the IW, the report concluded that Germany can no longer rely on a rebound in its traditional export markets and calls for urgent diversification and deeper integration within Europe.

Source: IndexBox Market Intelligence Platform