German industry is feeling the pressure. The VDMA engineering federation has called for bureaucracy cuts, tax relief, tighter import surveillance, and EU anti-dumping duties on goods that violate fair-trade rules. Chinese brands accounted for 3.7% of new car registrations in Germany in the first half of 2026, up from 2.3% in all of 2025. More than 400,000 German jobs have been lost since 2021 as demand for German goods in China has fallen.
Dependency on Chinese inputs for the energy transition is also rising. In the first five months of 2026, China supplied 81.8% of portable computers, 66.3% of smartphones, 64.1% of lithium-ion batteries, and 23.5% of electric passenger cars imported by Germany. The EU is drafting rules that would cap single-source procurement at 30-40% and require at least three suppliers for critical components in sectors such as chemicals and industrial machinery.
What to Watch
With the bilateral deficit for full-year 2025 already at 89.3 billion euros and the first-half 2026 trajectory pointing higher, the question is whether Europe's de-risking toolkit can keep pace with the speed of China's industrial upgrading.
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