How dependent are we really on the US and China?

How dependent are we really on the US and China? And what is at stake for us if the new US administration pursues a policy of isolation?

The situation is often presented in dramatic terms: if the US or China cease to be a market for German products – such as cars – the existence of large parts of the German export industry would be threatened.

The Prognos world economy experts have taken a close look at the figures for the Süddeutsche Zeitung and found that the German economy is more closely intertwined with the US than with China. If the US were to seal itself off, we would have to expect serious losses in income and jobs.

Direct link to the article in the Süddeutsche Zeitung (€)

Economic ties with the US and China

We considered the following dimensions in our analysis:

Foreign trade: The US is now by far the more important sales market. In 2023, Germany exported around 10 percent of its exports to the US. Only around 6 percent went to China. A shift has been observed in recent years. As late as 2020, the Chinese market was almost as large as the US market from the perspective of German exporters. The opposite is true for imports. In 2023, around 12 percent of German imports came from China, and around 7 percent from the US.
Employment: In 2023, more than 11.9 million Germans – more than a quarter of the workforce – worked directly or indirectly for the export sector. Around 1.2 million people worked for the US market, while around 0.8 million employees were responsible for the Chinese market.
Key industries: For some industries, the two markets play a particularly important role. The German pharmaceutical industry is more interconnected with the US than with other markets. The US is the world’s most important location for pharmaceutical innovation, and numerous leading pharmaceutical manufacturers are based there. In the field of electrical engineering, on the other hand, Germany imports a large number of goods from China. This can be traced back to the strong position of Chinese companies in this sector.
Investment: Germany has much closer ties with the US than with China when it comes to cross-border investment. In 2023, the US accounted for 17 percent of the total stock of German foreign investment, while China only accounted for 5 percent.
Research: German companies conduct more research in the United States than in China. A patent analysis shows that around 17 percent of (patented) research by German companies abroad is conducted in the United States, while China’s share is only around 9 percent.
Raw materials: In terms of foreign sourcing of raw materials, neither the US nor China plays a central role for Germany in the overall picture. However, Germany is heavily dependent on China for individual critical raw materials such as rare earth metals or magnesium. And Germany is increasingly importing energy raw materials from the US.

Germany is more closely integrated with the US than with China

The geopolitical rivalry between the US and China is likely to intensify in the years to come. Germany and German companies could – more or less explicitly – be faced with the choice of choosing one of the two sides – and thus one of the two markets. At first glance, it may appear that Germany is equally interwoven with both major economies. However, a closer look shows that economic relations and dependencies with the US are more profound overall.

This also means that if the US increasingly isolates itself during President Donald Trump’s term in office, this is likely to have serious consequences for individual industries and value chains.

Nevertheless, the dependencies shown are by no means one-sided. We, too, are a key partner for both the US and China. This applies particularly at the European level. The EU is a very important sales and procurement market for both the US and China.