On the diversion of Chinese exports to Germany

Its first objective is to identify unusual increases in German imports from China at the level of disaggregated product groups. Second, it examines potential diversion of Chinese products from the US by identifying intersections between product groups at the 6-digit level with a decline in US imports from China and, at the same time, an unusually high increase in German imports from China. The focus of the analysis is on the second quarter of 2025, when US tariffs on China were temporarily prohibitively high.

When analyzing increases in German imports from China, import volumes are considered, as price reductions, which may be part of the sales strategy of Chinese companies, lead to a decrease in the value of imports. Consequently, an analysis based on value would underestimate the increase in import pressure. Since there is no clear definition of what constitutes an unusual increase, the current rate of year-on-year volume growth is compared with the rates of change from 2010 to 2024. In addition, various criteria to identify an unusual increase are used. Table 4-1 provides an overview of the results of this analysis and shows that import pressure from China has currently risen sharply. It shows how many 6-digit product groups various combined criteria apply to. For example, the increase in German import volume from China in the second quarter (Q2) of 2025 compared to the second quarter of 2024 is at least 10 percent for 2,241 product groups (out of over 4,250 product groups with import data in Q2 2025). Their combined import value accounts for a significant 61 percent of Germany's total imports from China in Q2 2025, while the average price of these product groups fell by over 5 percent. Import volume growth of at least 10 percent, which is also greater than the median rate of change in previous years since 2010, can be found in 2,029 product groups. These account for a slightly lower share of total imports from China, at 57 percent. Even with import volume growth of at least 50 percent (and greater than the median of previous years), the product groups in question still account for 22 percent of the total value of German imports from China.

To identify potential diversion effects, overlapping product groups are identified for which the following two criteria apply: an absolute or relative decline in US imports from China in the first half (H1) of 2025 compared to the previous year, and a high or unusual increase in German import volumes from China in the second quarter of 2025 compared to the previous year. The slight time lag (H1 versus Q2) takes into account that a certain lead time is plausible before Chinese goods are diverted from the US to Germany. An overlap identified in this way gives rise to a suspicion of diversion. A causal link between a decline in US imports and an increase in German imports from China is not examined.

Looking at all product groups as a whole, there is often suspicion of diversion. For example, slightly more than half of the total value of German imports from China in Q2 2025 is accounted for by over 1,500 overlapping product groups. The following applies to these overlapping groups: German imports from China rose comparatively strongly in Q2 2025, by at least 10 percent, and US imports from China in H1 2025 declined in absolute or relative terms. In terms of import value, there are overlaps in a significant 85 percent of all product groups with a 10 percent increase in import volume, giving rise to suspicion of diversion. However, these statements also refer in part to consumer-related products such as textiles and fibers, which are not among the core areas of German industry.

However, when focusing on the core areas of German industry such as chemicals, electrical engineering, mechanical engineering, and vehicle manufacturing, potential diversion effects are also widespread. These can be identified at the aforementioned 10 percent threshold for 910 overlapping product groups, which account for around 39 percent of the total value of German imports from China. Overlaps are also common here, with a decline in US imports from China in terms of value for around two-thirds of all product groups with a 10 percent increase in German import volumes from China. In these core areas of German industry, the German economy is likely to produce many product groups, but there are also those in which China is known to be highly specialized, particularly in the electronics sector.

Therefore, the export-oriented core areas of German industry are also considered by focusing on those product groups from the core area of industry in which Germany exports at least as much as it imports in terms of total trade. Because this excludes products in which Germany imports heavily from China, particularly in the electronics sector, and does not itself have a strong export position, the number of overlapping product groups measured against the 10 percent threshold falls to 579 and their combined share of total imports from China to 11 percent. Overlaps between declines in US imports and increases in German import volumes are also less frequent here, but at just under 20 percent, they are still significant.

A closer look at a small selection of individual overlapping product groups in the export-oriented core sector of industry also reveals the harmfulness of potential diversion effects for the German economy. To this end, the 30 most important overlapping product groups in terms of value are examined in more detail for import volume growth thresholds of 10 percent and 50 percent.

• The suspicion of diversion is high in both cases, as almost two-thirds of the 30 overlapping product groups show double-digit rates of change in both the decline in US imports and the increase in German import volumes from China.
• At the 10 percent threshold, the most important overlapping product groups in terms of value are primarily products from the following sectors: road vehicles, mechanical engineering, and electrical equipment, in which Germany traditionally has particular strengths.
• At the 50 percent threshold, the increase in German import volume is even in triple digits in more than a third of the 30 cases, reflecting a very sharp rise in import pressure. Among the 30 overlapping product groups, mechanical engineering is less strongly represented, while plastics and goods made from them are relatively more so. Road and off-road vehicles feature particularly prominently in this list, occupying the top three places and five of the top ten. Hybrid cars in second and third place, electric trucks, and several types of car parts are particularly striking.

Regular monitoring of import increases from China and potential diversion effects is needed in order to identify affected industrial sectors that may be threatened by unfair competition in a timely manner. Trade defense instruments should be used consistently when distortions of competition are evident and European production is significantly affected. In addition, ways must be urgently sought to make the application of these instruments simpler, more efficient, and more effective in terms of their scope of action. On the other hand, caution is advised with regard to Buy European clauses.