German investment in China jumps to four-year high as Trump trade war bites

Investments by German companies in China rose to a four-year high in 2025, underscoring how US President Donald Trump’s trade war is prompting businesses and governments to strengthen commercial ties elsewhere, Reuters reports.

Previously unreported figures from the IW German Economic Institute show that German investment in China climbed to more than €7 billion ($8 billion) between January and November 2025, marking a 55.5% increase from the €4.5 billion recorded in both 2024 and 2023.

The data highlight how Trump’s aggressive trade policies in the first year of his second term — including sweeping US tariffs on European Union imports — have encouraged firms in Europe’s largest economy to shift their strategic focus toward China as an alternative market.

The trend comes as the UK government heads to China with a business delegation seeking deals across sectors ranging from automobiles to pharmaceuticals, the European Union moves closer to a trade agreement with South America, and Canada pursues expanded trade ties with China and India.

Berlin, meanwhile, has attempted to strike a delicate balance between adopting a tougher stance toward Beijing on trade and security issues while avoiding damage to its fundamental economic relationship with its largest trading partner.

“German companies are continuing to expand their activities in China — and at an accelerated pace,” said Juergen Matthes, head of international economic policy at the IW institute, citing a growing push to strengthen local supply chains.

Reuters reported last week that German companies nearly halved their investments in the United States during the first year of Trump’s second term, highlighting the scale of the strategic shift.

Matthes said the move was also driven by concerns “about geopolitical conflicts,” prompting companies to expand their China operations so they could function more independently in the event of major trade disruptions.

“Many companies say: ‘if I’m only producing in China for China, I’m reducing my risk of being affected by possible tariffs and export restrictions,’” he added.

Major German corporations including BASF, Volkswagen, Infineon, and Mercedes-Benz remain heavily reliant on the Chinese market, where a large share of the world’s automobiles and chemicals are sold.

Industrial manufacturer ebm-papst said it invested €30 million last year to expand its operations in China — more than a fifth of its total investment — in order to manufacture closer to its customers.

“This model has proven to be an important anchor of stability, especially in times of tariffs and geopolitical tensions,” the company said in a statement, adding that it also plans to expand its US business this year.

According to the IW report, which draws on data from Germany’s Bundesbank, total German investment in China in 2025 also exceeded the €6 billion annual average recorded between 2010 and 2024.

China last year reclaimed its position as Germany’s largest trading partner, after being overtaken by the United States in 2024, driven by rising imports from the world’s second-largest economy.

By Vafa Guliyeva