Germany set for record trade deficit with Asia-Pacific in 2026
BERLIN: Germany’s trade deficit with Asia-Pacific is set to hit a record of nearly €146 billion (USD163 billion) in 2026 as falling exports to China outweigh growing sales elsewhere in the region, according to a report by Germany Trade & Invest (GTAI) seen by Reuters.
The figures highlight the growing challenge facing German exporters in China, once one of their most important overseas markets, as Chinese companies expand domestic production of advanced technology, machinery and electric vehicles.
Exports to 29 core Asia-Pacific economies are expected to fall 3.2 percent this year to €185.3 billion, while imports are forecast to rise 6.4 percent to €330.9 billion, the state-owned trade promotion agency said.
German Chancellor Friedrich Merz is visiting Japan, South Korea and Singapore from Monday to Friday. On Tuesday he called for European and Asian middle powers to build a strategic alliance in trade, technology and security.
CHINA’S WEAKER DEMAND HITS GERMAN EXPORTERS
China accounts for around half of Germany’s goods trade with Asia-Pacific and has an outsized effect on the overall figures, GTAI said. Excluding China, German exports to the region would grow by 2.8 percent in 2026, while the trade deficit with Asia-Pacific would narrow to just under €35 billion.
German machinery exports to China fell 18 percent in the first seven months of 2026 from a year earlier, according to the report. Automotive exports dropped 30 percent over the same period.
German car sales in China have nearly halved from a peak of more than 5 million vehicles, GTAI said, as local manufacturers gain ground in electric cars and benefit from control over battery supply chains.
INDIA, SOUTHEAST ASIA GAIN GROUND
India is becoming a more important market and supplier for German companies, GTAI said. German exports to India have nearly doubled over the past decade, as have imports from the South Asian country. Imports are also becoming more diversified. While clothing remains important, German companies are increasingly buying pharmaceutical products and machine components from India, the report said.
Japan remains a relatively stable market for German companies despite the yen’s sharp fall against the euro and dollar over the past six years, which has eroded Japanese purchasing power.
GTAI expects German exports to the 11-member Association of Southeast Asian Nations (ASEAN) to grow faster than imports in 2026, helped by aircraft deliveries. Over the longer term, the region is becoming increasingly important as a source of electronics and electrical equipment, moving beyond its traditional role as a supplier of clothing and footwear.
GERMAN BUSINESS SENTIMENT IMPROVES
German business morale improved more than expected in October due to more optimistic expectations. The Ifo institute said its business climate index rose to 90.2 in October from 89.9 in September, a survey showed on Monday.