The survey results reveal that the trade conflict creates hurdles for German companies, mainly due to the impact of U.S. and Chinese tariffs. A notable decline in the economic outlook among German businesses in China is evident, with expectations for industry development continuing at a low level. Despite this, investment strategies remain strong. Half of the companies plan to increase their investments, and more than one-third accelerate their localization efforts in China as a strategic response to the ongoing trade tensions. Meanwhile, companies seek a stronger emphasis from the new German government on active and informed engagement with China to support their business.
Key Findings:
- Tariffs have the largest impact among all trade instruments: German companies are most affected by tariffs, with 76% citing U.S. tariffs and 63% mentioning Chinese tariffs. U.S. export controls rank third (43%), followed by U.S. anti-sanctions legislation with 39%.
- More impact from U.S. trade measures: 75% of companies are affected by the latest trade measures from the U.S. toward China, while 57% report seeing an impact from Chinese measures against the U.S.
- Accelerated localization as a response to trade conflict: 38% of German companies are accelerating their localization plans in China as one of their main responses to the trade conflict. Almost half (48%) are taking a wait-and-see approach and want to continue observing the situation.
- Outlook for China's economy is fading amid trade conflict: Over half (56%) of German companies predict a decline in economic conditions over the next six months, a substantial increase of 40 percentage points when asked the same question last year in May 2024. Meanwhile, only 15% expect an improvement, and 30% foresee no significant changes.
- Industry development continues to lag: Although showing improvement compared to last year, 44% still expect a decline in industry development for 2025. Meanwhile, 19% foresee improving conditions (September last year 15%), while 37% expect the situation to remain unchanged.
- Turnover and profit expectations muted: Only 29% expect an increase in turnover by the end of 2025, 4 percentage points less than in September last year. Moreover, expectations for profit increase have declined from 22% to 18%.
- Nonetheless, investment intentions remain solid: 50% of respondents intend to increase their investment in the next two years, showing a stable trend compared with 51% in September last year. Meanwhile, 18% of companies plan to decrease their investment, up 4 percentage points.
- Companies call for a more hands-on approach toward China: Two-thirds (66%) of companies want the new German government to promote an active and informed engagement with China as a way to support their business. Additionally, 52% believe improving China’s image in Germany would strengthen operations, while 40% see early government visits as key support.
