Germany does not want China decoupling but must defend its interests, president warns

Economic decoupling means breaking or sharply reducing economic links with China. It could involve cutting trade, investment, supply-chain connections, or reliance on Chinese products. Germany rejects that broad separation because it believes trade can benefit both sides and should not make Europe poorer or safer only in theory.

De-risking takes a narrower approach. Germany would keep useful economic relationships but reduce unhealthy, one-sided dependencies. Diversification means finding additional suppliers, markets, or production locations for energy, supply chains, critical raw materials, and manufactured goods. This spreads risk without ending trade with China.

The distinction matters because Europe faces both economic opportunity and vulnerability. The EU’s large trade deficit and disputes over subsidies, imports, and minerals are pushing policymakers toward firmer safeguards. Steinmeier and Merz support resetting the relationship, not creating a new block confrontation. Their goal is continued engagement with stronger balance and resilience.

The EU’s goods trade deficit with China rose above €370 billion last year, equal to about US$412 billion. It is on track to exceed €400 billion this year. A deficit means the EU buys much more goods from China than it sells there, creating a major imbalance in two-way trade.

European Commission President Ursula von der Leyen called the figure “unsustainable.” The concern is not simply the size of one trade number. Steinmeier warned that Europe could not allow its industrial base to disappear. Heavy dependence on imports can leave European producers weaker and make supply disruptions or political pressure more damaging.

The deficit is helping drive a firmer European response. Ministers are considering further limits on Chinese imports and tools such as plastic import quotas. At the same time, Germany still rejects complete decoupling. It wants negotiation and trade that produces gains for both sides rather than a win-lose relationship.

Two years ago, the European Union imposed tariffs on Chinese electric vehicles because it was concerned that state subsidies gave Chinese producers an unfair advantage. The measure was designed to protect European competition and respond to a trade imbalance. It also marked a sharper step in Europe’s economic relationship with Beijing.

China responded with tariffs on European brandy, pork, and dairy products. Beijing also restricted exports of critical minerals. These actions widened the dispute beyond cars. They showed how trade decisions can affect food, consumer goods, industrial inputs, and production capacity on both sides.

Tensions have not produced only retaliation. An agreement reached earlier this month between Beijing and Brussels could cut Chinese hybrid-car exports by more than half. European officials called it a crucial first step toward rebalancing trade. Steinmeier said it showed that dialogue can still produce solutions, although the broader dispute remains unresolved.

Germany voted against the EU’s Chinese electric-vehicle tariffs two years ago. Its carmakers had extensive investments and an important market share in China. Berlin therefore feared that tariffs could provoke retaliation, damage sales, and harm companies deeply connected to the Chinese market.

Since then, the economic picture has become harder to ignore. The EU’s goods trade deficit with China exceeded €370 billion last year and may pass €400 billion this year. China also imposed tariffs on European brandy, pork, and dairy, while restricting critical-mineral exports. These developments exposed risks beyond the automobile sector.

Germany now supports a more realistic approach based on de-risking and diversification. It wants to reduce unhealthy, one-sided dependencies and protect Europe’s industrial base. The shift does not mean Germany wants to decouple. Steinmeier and Merz both argue for tougher, fairer engagement, coordinated with the wider European Union.

Germany is a leading national voice because it is Europe’s largest economy and has major commercial interests in China. Its president and chancellor are arguing for de-risking, diversification, and a fairer relationship. Germany also wants to protect its industrial base without ending economic ties or creating rival global blocs.

The European Union controls the common trade response. Two years ago, it imposed tariffs on Chinese electric vehicles. EU ministers are now calling for further limits on Chinese imports and considering additional trade-defence tools, including import quotas on plastics. The EU also negotiated an agreement with Beijing that could reduce Chinese hybrid-car exports by more than half.

Germany does not claim it can act alone. Steinmeier stressed that Germany would act in concert with the rest of the EU. This division of roles allows Berlin to represent its national economic concerns while using the EU’s collective trade power. The likely direction is coordinated pressure alongside dialogue, not unilateral separation.

Europe’s basic alternative is diversification: avoid relying on one country for energy, supply chains, critical minerals, or manufactured goods. It can seek additional suppliers, spread production across countries, and support European capacity where strategic goods are involved. These steps reduce exposure without ending trade with China.

For critical minerals, practical tools include long-term contracts with several producers, recycling, stockpiles, and developing processing capacity outside China. For manufactured goods, Europe can encourage domestic production, use multiple overseas suppliers, and apply trade-defence measures when officials find harmful distortions. These specific tools go beyond the article’s examples but follow its de-risking approach.

The article identifies the direction rather than a complete policy plan. EU ministers are exploring further import limits and mechanisms such as plastic quotas. The challenge is balancing resilience with continued trade. Steinmeier’s position is that diversification should correct one-sided dependence while preserving dialogue and mutually beneficial commerce.

Industrial capacity means the ability to make important goods at home or through dependable partners. Critical raw materials are inputs needed for industrial production. If a country loses factories, skills, processing, or reliable access to these materials, it may struggle to produce goods when imports are interrupted or restricted.

The article shows this risk through China’s restrictions on critical-mineral exports and Europe’s concern about one-sided dependencies. It also describes a huge EU trade deficit and warns that Europe cannot allow its industrial base to be lost. These are not only ordinary sales figures; they concern the capacity to supply and compete.

That is why Europe is considering firmer measures while still rejecting decoupling. Diversification can provide alternative sources, and trade-defence tools can protect producers from harmful imbalances. Steinmeier argues that China should understand Europe’s concern because China’s own rise was built on industrialisation. Economic resilience therefore supports wider national security.