Merz's China Visit Signals Germany's Pivot Toward Pragmatic Engagement Despite Growing Trade Imbalance

6 predicted events · 5 source articles analyzed · Model: claude-sonnet-4-5-20250929

The High-Stakes Diplomatic Gambit

German Chancellor Friedrich Merz's upcoming visit to China, scheduled for February 24-27, 2026, represents a critical inflection point in European-Chinese relations. Coming at a time when China has reclaimed its position as Germany's top trading partner—with bilateral trade totaling €251.8 billion in 2025 (Article 3)—this visit carries implications far beyond ceremonial diplomacy. Merz faces the unenviable task of balancing Germany's economic dependence on China against mounting domestic pressure to counter what many see as unfair trade practices that are devastating key German industries.

The Current Landscape: A Relationship Under Strain

The economic relationship between Germany and China has become increasingly asymmetric and problematic. According to Article 4, Germany now faces a record €89 billion trade deficit with China, a stark reversal from the more balanced partnership of previous years. German exports to China plummeted by 9.7% in 2025 to €81.3 billion, while Chinese imports surged by 8.8% to €170.6 billion (Article 3). The automotive sector exemplifies this "second China shock" that Article 5 describes. German vehicle exports to China have collapsed by two-thirds since 2022, while Chinese electric vehicle manufacturers like BYD have increased sales in Germany by over 700% in the past year. Legacy German automakers—Volkswagen, BMW, and Mercedes-Benz—have issued profit warnings as they face pressure both in their home market and in China, historically their most important foreign market.

What to Expect from the Visit

Merz's itinerary reveals Germany's strategic priorities. His meetings with Premier Li Qiang and President Xi Jinping will be complemented by visits to Mercedes-Benz facilities, Chinese robotics firm Unitree, and Siemens Energy operations (Articles 1 and 2). This combination of political engagement and corporate diplomacy suggests Germany is pursuing what Article 1 calls "the right balance of cooperation"—neither full decoupling nor business as usual. ### Prediction 1: Limited Concrete Outcomes, Strong Symbolic Messaging The visit will likely produce few binding agreements or major trade breakthroughs. Instead, expect carefully crafted joint statements emphasizing "mutual respect," "fair competition," and "continued dialogue." China will leverage the visit to demonstrate that European powers are not following American decoupling strategies, while Merz will use it domestically to show he's defending German interests through engagement rather than confrontation. ### Prediction 2: Germany Will Announce Selective Industrial Protection Measures Within three months of this visit, Germany will likely implement or advocate for targeted trade barriers against specific Chinese imports, particularly in the automotive and renewable energy sectors. Article 5 notes that "momentum is building for fresh trade barriers to stop unfair trade practices." However, these measures will be carefully calibrated to avoid triggering full-scale trade retaliation from Beijing. Expect sectoral interventions rather than comprehensive tariffs—possibly subsidies for European EV manufacturers, stricter certification requirements, or expanded use of anti-dumping mechanisms. ### Prediction 3: Increased German Investment in China-Adjacent Markets To hedge against overreliance on China, German corporations will accelerate their "China Plus One" strategies, diversifying supply chains and production facilities to Southeast Asian countries, India, and potentially Eastern Europe. This won't mean abandoning the Chinese market—which remains too large to ignore—but rather building redundancy into German industrial strategy. The visit will likely include private discussions about protecting existing German investments in China while future growth focuses elsewhere. ### Prediction 4: Divergence Between Germany and Other NATO Allies Merz's visit—coming as Article 2 notes he is "the latest European leader to visit China amid tensions with the US"—signals a European willingness to chart an independent course on China policy. This will create friction with the United States, particularly if the Trump administration continues aggressive tariff policies. Germany's calculation appears to be that maintaining economic ties with China is existentially important, even if it complicates transatlantic relations. Expect this to manifest in lukewarm German support for US-led initiatives to contain Chinese technological advancement. ### Prediction 5: Domestic Political Consequences for Merz The visit represents a political gamble for Merz, who took office in May 2025. If he returns without substantive concessions from China on market access or trade imbalances, he will face criticism from both the political left (concerned about human rights) and industrial interests (demanding protection from Chinese competition). However, if he can secure even modest agreements—perhaps on reducing regulatory barriers for German firms or limiting Chinese state subsidies in key sectors—he can claim diplomatic success.

The Broader Implications

This visit occurs at a moment when the architecture of global trade is being fundamentally reshaped. Germany, as Europe's largest economy and most China-dependent major Western nation, finds itself in an uncomfortable position. The €89 billion trade deficit (Article 4) is politically unsustainable, yet German prosperity has been built on export-oriented globalization that presumed open markets. The "second China shock" described in Article 5 is fundamentally different from the first. While the initial wave saw China as a manufacturing base for Western companies, the current shock involves China moving up the value chain and competing directly with German technological superiority in automobiles, industrial machinery, and renewable energy.

Conclusion: Managed Decline or Strategic Adaptation?

Merz's China visit will not resolve the fundamental tensions in the Germany-China relationship. Instead, it represents the beginning of a multi-year adjustment process in which Germany attempts to remain economically engaged with China while protecting its industrial base. The success of this balancing act will determine not only Germany's economic future but also whether Europe can maintain strategic autonomy between American and Chinese spheres of influence. The symbolism of Merz visiting during the Year of the Horse—which China proposed (Article 2)—is apt. This relationship will require both strength and adaptability. The coming months will reveal whether Germany can muster both.