Germany’s export‑oriented economy is gasping under growing protectionism, weak global trade, and fierce competition from China. According to The Wall Street Journal, German GDP growth this year will be a modest 1% at best.

The current slowdown is the result of years of stagnation. The country has lagged the rest of the eurozone since before the pandemic: manufacturing employment has fallen to a ten‑year low, and corporate investment has been declining nonstop since 2020.

The main challenge for German industry has been China’s changing role. What used to be a lucrative market has become a direct and aggressive competitor. Chinese makers of electric vehicles, machine tools, and industrial equipment are now displacing German corporations not only in Asia but across Europe as well. The situation is aggravated by Beijing’s export restrictions on rare‑earth metals, which have already disrupted supply chains in engineering, automotive, and defense sectors in Germany.

External pressure is mounting on all fronts. The Middle East conflict keeps energy prices elevated, while US tariffs hit exporters’ margins. Besides, German businesses have felt their technological dependence on the United States firsthand: recent US export curbs on new AI models from Anthropic have left some European firms without access to cutting‑edge neural networks.

Chancellor Friedrich Merz’s government is attempting to revive the economy. The cabinet has introduced tax breaks for businesses, cut energy prices, and stepped up budget injections into infrastructure and defense. The most radical move has been the announced plan to raise the retirement age from 67 to 70.

Economists warn that such measures are not enough. Authorities are being urged to implement deep structural reforms: drastically curb bureaucracy, localize production of critical components to reduce dependence on China, and massively scale up investment in startups. Europe’s largest economy faces a tough battle to save its foundational industries — chemicals, car manufacturing, and engineering.