It was good while it lasted. As China opened its economy to market reforms and foreign goods over the past three decade, the Chinese developed a taste for many things, including German cars. But now the Chinese economy is losing steam, and its people aren’t as enamored of BMW’s and Volkswagens as they used to be.
Making things worse for Germany, Trump has pursued his “America First” agenda, which has thrown some cold water on global trade in general.
The slowdown is not helping at a challenging time for Germany. Its economy contracted 0.1% in the second quarter and some analysts expect third-quarter gross domestic product (GDP) data due on Nov. 14 to show a similar decline – which would leave the economy in recession for the first time since 2013.
To be clear, German trade with China is a small part of the country’s $3.8 trillion economy, but it steadily grew, making it important at the margin.
Now, with growth in Chinese demand for goods “Made In Germany” ebbing, and by some measures falling, the once lucrative export market is proving less supportive as the economy stagnates.
Axel Mattern, a senior manager at the Port of Hamburg, said:
“China is our most important trading partner but the future trend is hard to predict.”
Some industrialists say politicians who looked past human rights abuses in China in the hope trade would turn the Asian country into a Western-style state with an open economy and equal market access were deluded.
Federation of German Industry’s (BDI) Stefan Mair, a leading advocate for a more pragmatic German policy towards China, said:
“That turned out to be wishful thinking.”
The fantasy wasn’t restricted to Germany. U.S. President George W. Bush supported adding China to the WTO for the same reason, thinking the country would bend toward Western norms. It didn’t work. They sold us a lot of their stuff as the West sent them a lot of cash, but the country is arguably more authoritarian today than it has been in 20 years.
The International Monetary Fund downgraded its growth forecast for Germany’s economy last month to 0.5% in 2019 and 1.2% in 2020, saying in its World Economic Outlook that weaker Chinese demand was one factor behind a broader slowdown in industrial output, along with the fallout from trade tensions.