The decline of German manufacturing
The second China shock is top of the agenda among European manufacturing businesses and in political circles.
The second "China shock" is currently the top concern for European manufacturing businesses and political figures. The phenomenon refers to Chinese companies challenging European manufacturers in high-tech goods within European markets and third countries, causing significant harm to European manufacturers, particularly those in Germany.
An analysis by the Kiel Institute for the World Economy examined the market share shifts of Chinese and EU companies in third markets between 2012-14 and 2022-24. The findings indicate that, apart from luxury items, art, and weapons, European manufacturers have experienced a decline in market share in third countries while Chinese manufacturers have gained market share (Source: Chowdhry et al., 2026).
While European manufacturers, on average, have lost market share, exporters from certain countries have lost more than others. Germany, in particular, has lost ground in its core industries, including cars, machinery, electrical equipment, optical and medical equipment, as shown by the red triangle in the chart below left, representing goods with market share declines exceeding the European average (Source: Chowdhry et al., 2026).
The table on the right lists excess market share losses for German manufacturers, highlighting their rapid decline across multiple goods categories.
According to the authors and the journalist's perspective, this trend suggests a major issue: German manufacturers are not only losing market share to Chinese products in terms of price but also in terms of quality and innovation. The journalist argues that this decline extends beyond Germany, as it is evident in the state of the German automotive industry, which is failing to keep pace with Chinese competitors (Source: Chowdhry et al., 2026).
The solution, the author suggests, lies in heavy investment in future technologies, but only if German manufacturers demonstrate a commitment to innovation. Otherwise, tariffs will not be sufficient to help them survive in the global market.
Written by urgent.news from Klement on Investing's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
