Recent data reveals that German corporate investments in China surged to over 7 billion euros (8 billion dollars) between January and November 2025, marking a 55.5% increase compared to approximately 4.5 billion euros in 2024. This rise represents the highest level in four years and reflects a strategic pivot by European firms amid evolving global trade conditions. The shift is largely attributed to concerns over former U.S. President Donald Trump’s tariff policies, which have prompted German businesses to strengthen their presence in China as a way to mitigate risks linked to transatlantic trade tensions.
According to the German Institute for Economic Research (IW), companies are accelerating their expansion in the Chinese market, seeking greater operational independence in the face of potential geopolitical disruptions. Jürgen Matthis, head of international economic policy at IW, noted that many firms now view local production in China for the Chinese market as a way to reduce exposure to possible export restrictions and customs duties. This strategy allows them to operate more autonomously should major trade disturbances occur.
Major German corporations such as Volkswagen, Infineon, and Mercedes-Benz continue to rely heavily on China as a critical market for automobiles and chemical products. The country reclaimed its position as Germany’s top trading partner in 2025, overtaking the United States, which had briefly taken the lead in 2024 due to increased Chinese imports.
Data cited in the IW report, sourced from Germany’s central bank, shows that 2025 investment levels surpassed the annual average of 6 billion euros (7.18 billion dollars) recorded between 2010 and 2024. German Economy Minister Katharina Reiche emphasized the need for Berlin to explore new international partnerships amid a changing global landscape. Speaking at an energy summit in Berlin, she highlighted growing uncertainty in global alliances, stating that while existing partnerships must be maintained, diversification is essential.
Reiche specifically mentioned Latin America, India, the Middle East, Canada, Australia, and Asian nations like Malaysia as potential areas for deeper economic engagement. This realignment mirrors similar moves by other Western allies, including the United Kingdom and Canada. UK Prime Minister Keir Starmer recently visited Beijing with a large business delegation, aiming to secure deals across sectors from pharmaceuticals to automotive, asserting that isolating the world’s second-largest economy is impractical.
Meanwhile, Canadian Prime Minister Mark Carney downplayed threats from Trump regarding a potential 100% tariff on Canadian goods if Ottawa deepens trade ties with China. Carney clarified that the recent agreement with Beijing focuses only on easing tariffs in sectors previously affected by such measures, not on broad new trade commitments. He anticipates a robust review of the USMCA trade pact this year, viewing some U.S. statements as pre-negotiation positioning rather than definitive policy.
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After Britain and Canada, Germany strengthens its economic relations with China
Recent data shows that German corporate investments in China rose in 2025 to their highest level in 4 years, amid concerns over tariffs imposed by U.S. President Donald Trump, in a move similar to that taken by other U.S. allies such as Britain and Canada.
Data released by the German Institute for Economic Research (IW), according to Reuters, showed that investments in China rose to more than 7 billion euros (8 billion dollars) between January and November 2025, an increase of 55.5% over about 4.5 billion euros in 2024.
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These data show how Trump’s trade policies, especially tariffs on European Union imports, have pushed companies in Germany – Europe’s largest economy – to shift their focus to China and consider it an alternative.
Expanding activity in China
Jürgen Matthis, head of the International Economic Policy Department at the German Institute for Economic Research, told Reuters, “German companies continue to expand their activities in China, and at an accelerating pace.”
Reuters reported last week that German companies halved their investments in the United States in the first year of Trump’s second term.
Matthis said this shift is also driven by concerns “about geopolitical conflicts” that are pushing companies to consolidate their operations in China so they can operate more independently in the event of major trade disruptions.
He added, “Many companies say, ‘If I produce in China for China only, I reduce the risk of being affected by potential tariffs and export restrictions.'”
German companies such as Volkswagen, Infineon and Mercedes-Benz still rely heavily on the Chinese market, which represents a huge market for cars and chemicals.
Germany’s largest trading partner
A report by the German Institute for Economic Research, based on data from the German central bank, showed that the total figure for German investments in China in 2025 also exceeded the average for the period 2010 to 2024, which was 6 billion euros (7.18 billion dollars).
China regained its position last year as Germany’s largest trading partner, after the United States surpassed it in 2024 due to increased Chinese imports.
In this context, German Minister for Economic Affairs Katharina Reiche said on Tuesday that Berlin should look for new partners amid a changing global system, referring to deteriorating relations with the United States.
Reiche added during an energy summit in Berlin, “The world has become more opaque, and the alliances we trusted and relied on have begun to collapse.”
She continued, “This does not mean abandoning them, but means continuing to work together no matter how difficult it may be in some cases, and looking for new partners,” specifically mentioning South America, India, the Middle East, Canada, Australia, and Asian countries such as Malaysia.
Similar move by Britain and Canada
The announcement of these trade figures in Berlin comes as British Prime Minister Keir Starmer heads to Beijing with a large business delegation including representatives from dozens of British companies, hoping to conclude more trade deals in sectors ranging from automobiles to pharmaceuticals.
Starmer stressed that it is “illogical” to ignore trade relations with China, the world’s second-largest economy, affirming that his country will not have to choose between the United States and China.
In a related context, Canadian Prime Minister Mark Carney said on Monday that some of Trump’s threats should be seen as preparatory steps before negotiations to renew the free trade agreement between the two major trading partners.
Carney pointed out that they are entering a review of the United States-Mexico-Canada Agreement this year, and said he expects a “strong review.”
Trump threatened earlier in the week to impose a 100% tariff on goods imported from Canada if it proceeds with a trade deal with Beijing, following Carney’s visit to Beijing last week.
However, Carney said their recent agreement with China is limited only to reducing tariffs on certain sectors that were recently affected by their implementation.