Germany’s Investment in China Hits a Four-Year High

Quick overview

This is part of a broader trend among so-called “middle powers” such as the United Kingdom and Canada, which are seeking to reduce their dependence on the United States. At the same time, the European Union has recently signed free trade agreements with Mercosur and India.

German companies’ investment in China reached a four-year high in 2025, highlighting how the erratic trade policy of U.S. President Donald Trump—who has just announced new tariffs on South Korea—is pushing allied countries, including those in the European Union (EU), to deepen commercial ties outside the U.S. sphere.

According to data compiled by Reuters and the German Economic Institute (IW), German investment in China rose to more than $8 billion between January and November of last year, an increase of 55.5% compared with the roughly $4.4 billion recorded in both 2023 and 2024.

At the same time, German companies nearly halved their investments in the United States during the first year of Trump’s second term. Meanwhile, China reclaimed its position as Germany’s largest trading partner last year, after having been overtaken by the U.S. in 2024.

The figures illustrate how the Trump administration’s aggressive tariff policies following its return to the White House have undermined business confidence among firms in Europe’s largest economy, prompting them to look to China as an alternative market.

This shift comes as the EU signed a free trade agreement with Mercosur just weeks ago and finalized another deal with India only hours ago.

Middle powers seek alternatives

Germany is not alone in strengthening trade ties beyond the U.S. sphere of influence. British officials are traveling to China this week in hopes of securing additional trade agreements, ranging from automobiles to pharmaceuticals.

Similarly, Canada is looking to expand its trade relationships with China and India. In this context, Prime Minister Mark Carney presented an alternative to Trump’s worldview at the World Economic Forum in Davos last week.

Carney argued that while the rules-based global order may have come to an end, Canada and other “middle powers” can act collectively to avoid becoming casualties of U.S. trade policy. “When the rules no longer protect you, you have to protect yourself,” he said.

The remark came shortly before Carney continued negotiations with China on a preliminary trade agreement that would include preferential access for Chinese electric vehicles to the Canadian market. Shortly thereafter, Trump threatened to impose a 100% tariff on Canadian products.

ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

Related Articles