Merz goes to Beijing as Germany reels from ‘China shock’

(CN) — German Chancellor Friedrich Merz made his first trip as chancellor to China on Wednesday in a push to rebalance a trade relationship that is quickly going in the wrong direction for Berlin.

Anxiety is high in Germany as Chinese electric vehicles, solar panels, machinery and other high-end goods pour into Europe, gobble up market share and force German companies to lay off workers.

It's being called the “second China shock,” a reference to the bludgeoning U.S. manufacturing suffered following China's 2001 entry into the World Trade Organization and subsequent flood of cheap Chinese goods.

This time around it's Germany, Europe's industrial heavyweight, that's getting hit as Chinese exports soar, in part as a response to U.S. President Donald Trump's protectionist tariffs strategy that has led China to increase sales in Europe, Africa and elsewhere.

However, Merz's trip to Beijing and handshake with Chinese President Xi Jinping also was cast as the latest attempt by a Western leader miffed by Trump's trade wars to cozy up with America's No. 1 rival and show he too can play great power politics, a term increasingly used to describe this moment when international law is disregarded and powerful nations bully weaker ones.

At the Munich Security Conference earlier this month, Merz talked about Europe's need to act more decisively and safeguard its interests by building up its own capacities in technology, defense, supply chains and raw materials.

“We have crossed the threshold into an era that is once again openly characterized by power and, above all, great power politics,” he said in Munich. “Our task as Europeans and, of course, as Germans, is to acknowledge this new reality.

“We have realized that, in the era of great powers, our freedom is no longer a given. It is under threat. It will take determination and willpower to assert this freedom. This will require us to be prepared for change, for transformation and, yes, even for sacrifice — not at some point in the future, but now.”

Merz became the latest in a string of Western leaders to land in China in recent months.

In December, French President Emmanuel Macron went, followed by Canadian Prime Minister Mark Carney and British Prime Minister Keir in January. Trump is expected to meet Xi at the end of March in what would be his first visit to Beijing in eight years.

Merz's trip, though, was mostly about trade at a moment when it seems China needs Germany less and Germany needs China more.

Last year, Germany's trade deficit with China reached a record 89 billion euros ($105 billion), a statistic that shows Chinese firms are turning into main competitors for German companies.

In a bitter blow to German pride, experts say a historic role reversal is underway.

In the 1980s, China welcomed German know-how and eagerly allowed German firms to equip their factories. These days, German companies are eager to learn from China how to build electric vehicles, robots and other cutting-edge technology. German firms are increasing their investments in China.

At the same time, German exports to China are falling.

Germany's car sales are plummeting in the face of a soaring Chinese electric car sector. In 2020, German cars counted for about 25% of China's market, but that share has dropped to about 13%.

For years, China was Germany's largest or second-largest export destination, but in 2024 it fell to fifth place and it is expected to decline further.

In China, Merz said he told Chinese leaders that the exploding trade imbalance was “not healthy.” The imbalance has quadrupled in the past five years, he said.

“We are, therefore, addressing it and want to open up ways to reduce the trade deficit,” he told reporters, as reported by German public broadcaster DW.

Merz and other European leaders accuse China of unfair trade practices by subsidizing its companies and closing off sectors of the Chinese economy to foreign competitors. Merz said he took up these issues with China's leaders.

The chancellor also announced China would buy up to 120 aircraft from Airbus, a European aviation giant.

Courthouse News reporter Cain Burdeau is based in the European Union.

Follow @cainburdeau