The German government is preparing a major economic security package to protect strategic industries from risks linked to China. The plan may include new tariffs on hybrid electric vehicles. According to people familiar with the matter, German ministries are analyzing the country’s dependencies and vulnerabilities regarding China and evaluating potential countermeasures.
Potential measures include mandatory joint venture requirements, stricter screening of investments into Germany and German investments abroad, and a strengthened export control regime. The government of Chancellor Friedrich Merz aims to secure cabinet approval by October 14, after which it will seek broader support from the European Union. However, these measures have not yet been consolidated into a single draft, and government approval is not guaranteed.
Germany shifts its China policy
The plans signal a hardening of Germany’s policy toward China, which has traditionally been cautious due to the country’s export-oriented economy and deep commercial ties with Beijing. The EU trade deficit with China currently exceeds €1 billion per day, while an industrial downturn in Germany is accompanied by announcements of tens of thousands of job cuts. Notably, Volkswagen AG plans to increase its global job cuts to 100,000.
The new measures aim to make economic relations with China more reciprocal. Earlier this year, Friedrich Merz said: “we underestimated the power and economic strength of China”, adding that Europe is experiencing “a great strategic turning point”.
Berlin is working with Paris to gain the support of other EU nations at a summit in Brussels in October and ahead of talks with China later that month. According to sources who spoke on condition of anonymity, the two capitals are working on a joint position paper to be presented to the EU as a basis for bloc-wide measures.
Source: Bloomberg
