Germany Warned of 'China Shock 2.0' as Trade Imbalance Widens

Germany faces a significant economic challenge mirroring the 'China Shock' that impacted the U.S. in the early 2000s, according to a recent report by the Centre for European Reform (CER). The Brussels-based think tank warns that Europe's largest economy risks substantial deindustrialization if it fails to address its rapidly expanding trade deficit with China. The CER highlights a sharp increase in China's trade surplus with Germany, which reportedly doubled from $12 billion in 2024 to $25 billion in 2025. This surge contributes to a broader $94 billion trade imbalance, indicating a growing dependence on Chinese imports and a potential hollowing out of domestic industries. The report explicitly draws parallels to the U.S. experience following China's accession to the World Trade Organization in 2001, which led to widespread factory closures and job losses in various American manufacturing sectors. The warning suggests that Germany's current economic trajectory with China is unsustainable and could lead to severe long-term consequences for its industrial base. The think tank urges German policymakers to critically reassess their economic relationship with Beijing, emphasizing the need for proactive measures to safeguard domestic industries and prevent a similar deindustrialization trend seen elsewhere. Failure to act, the CER implies, could result in lasting structural damage to the German economy.