Exclusive-German firms' China investments driven to four-year high by US trade wars

German Companies Boost Investments in China Amid U.S. Trade Tensions

Impact of U.S. Trade Policies on German Investments in China

By Rene Wagner and Christoph Steitz

BERLIN/FRANKFURT, Jan 27 (Reuters) - Investments by German companies in China hit a four-year high in 2025, data compiled for Reuters shows, underscoring how U.S. President Donald Trump's trade policy is pushing industries and governments to boost business ties elsewhere.

The previously unreported data from the IW German Economic Institute showed investments in China rose to more than 7 billion euros ($8 billion) between January and November last year, up 55.5% from 4.5 billion euros in 2024 and 2023.

Growth in Investment Figures

The figures show how the Trump administration's aggressive trade policies in his first year in office, including far-reaching tariffs on EU imports, have pushed firms in Europe's top economy to shift their focus to China as an alternative.

Britain's government heads to China this week with a delegation hoping to seal more business deals from cars to pharmaceuticals, the EU nearing a deal with South America, and Canada is seeking to expand trade deals with China and India.

Berlin has sought to balance toughening its stance towards Beijing over trade and security while trying to avoid damaging the fundamental relationship with its top trade partner.

Strategic Importance of the Chinese Market

"German companies are continuing to expand their activities in China – and at an accelerated pace," Juergen Matthes, head of international economic policy at the IW institute, told Reuters, citing a trend to strengthen local supply chains.

Reuters reported last week that German firms nearly halved U.S. investments in the first year of Trump's second term.

China reclaimed its spot as Germany's top trading partner last year after being overtaken by the U.S. in 2024, driven by rising imports from the world's second-largest economy.

FEAR OF 'GEOPOLITICAL CONFLICTS'

The shift was also driven by concerns "about geopolitical conflicts" that were prompting companies to bulk up their China business so it could operate more independently in case of any major trade disruptions, Matthes said.

"Many companies say: 'if I'm only producing in China for China, I'm reducing my risk of being affected by possible tariffs and export restrictions'."

Concerns Over Geopolitical Conflicts

German companies ranging from BASF and Volkswagen to Infineon and Mercedes-Benz remain heavily dependent on the Chinese market, where most of the world's cars and chemicals are sold.

Volkswagen said both the Chinese and U.S. markets were of great strategic importance, with investments being made "independently of one another" in line with the respective local strategy.

Europe's largest automaker said technologies and products developed in China were now used more extensively in other regions, including Southeast Asia, the Middle East, South America and Africa.

"China is thus helping to further strengthen the Group's global presence and competitiveness," a spokesperson said.

German Economy Minister Katherina Reiche on Tuesday highlighted the need to seek new alliances in light of established relations becoming more fragile.

German fan and motor maker ebm-papst said that last year it invested 30 million euros in expanding its Chinese operations, accounting for more than a fifth of total investments, in order to produce more where its customers are.

"This model has proven to be an important anchor of stability, especially in times of tariffs and geopolitical tensions," the company said in a statement, adding it was also planning to expand its U.S. business this year.

The overall investment figure for 2025 also beats the 6 billion euro average for the period 2010 to 2024, the IW report, which draws on data from Germany's Bundesbank, showed.

($1 = 0.8436 euros)

(Reporting by Rene Wagner and Christoph Steitz; Editing by Adam Jourdan, Jo Mason, Toby Chopra and Alexander Smith)