BERLIN/BEIJING/WASHINGTON (own report) – After weeks of Western concerns about a halt to China’s exports of rare earths that are indispensable for many advanced industrial processes, the situation is beginning to ease. Beijing introduced export controls on seven rare earth metals on 4 April in response to Trump’s fierce US tariffs on China. German industry is also affected by Beijing’s move. As it was unclear when and whether export licenses would be issued again, there was growing anxiety on the part of German companies. At the beginning of May there were reports that it was only “a matter of weeks” before the first production shutdowns would occur. But on Tuesday, it was announced that new deliveries of the required rare earths had in fact been approved. With its introduction of export controls, Beijing is mainly targeting the US arms industry, which depends on large volumes of rare earths. The current agreement between Washington and Beijing to reduce tariffs now rests upon China’s suspension of some non-tariff measures. This could include a lowering of export barriers for rare earths. Calls for Western economies to mine rare earths themselves have so far led nowhere. The main difficulty centres on excessive processing costs and major environmental damage. Read more

BERLIN/BRUSSELS/BEIJING (own report) – Disputes over future economic relations with China are escalating in Berlin and Brussels. They were sparked by the Trump administration’s offer to grant countries more favorable tariffs for exports to the USA, if they reduce their economic cooperation with China. Washington is also luring automotive corporations with an exclusive cooperation in the development of autonomous driving – with the objective of jointly sidelining Chinese auto manufacturers. German car companies have long since begun close cooperation with Chinese companies. Last week, for example, BMW announced that it was developing new models in cooperation with Huawei and Alibaba, as well as with the support of the new AI start-up DeepSeek,. Around three dozen German companies have written to the incoming German government, expressing that to a growing degree they are depending on Chinese companies, which are increasingly becoming “innovation leaders.” Therefore, they are hoping for closer cooperation with China. In the latter half of July, the EU is preparing to hold an EU-China summit in Beijing. Read more

BERLIN/WASHINGTON (own report) – Germany’s leading foreign policy journal proposes comprehensive rearmament of Germany and the rest of Europe in favor of a vigorous militarization of the Asia-Pacific region. According to the magazine “Internationale Politik,” published by the German Council on Foreign Relations (DGAP), European states must rapidly build up their armed forces and take control not only of their own continent, but also “the Mediterranean, as well as the Red Sea and the Bab al Mandab Strait, if necessary” to “reduce the need for US troops in Europe.” If this succeeds, the United States would have sufficient military capacity available should “war break out in the Indo-Pacific.” European countries should also prepare for possible war against China by increasing their defense industrial capacities to replace spent US ammunition if necessary. Experts are noticing that even among the countries of the Asian-Pacific region, there is a growing shift away from the declining Western domination and a growing “Asianization” of their military relations. Read more

BERLIN/MOSCOW/BEIJING (own report) – Several leading politicians in Berlin’s governing coalition are pushing for the release of longer-range Western weapon systems for Ukraine to attack targets deep inside Russia. “There is no alternative,” claims Anton Hofreiter, a senior member of the Green party in the ruling coalition. Voices from the SPD are also seeking to greenlight what is a very serious escalation. Moscow, for its part, has stated that, the deployment of, for instance, the Storm Shadow cruise missile would necessarily involve Western military personnel and that means NATO countries actively entering the war as direct participants. The potential consequences are terrifying. Yet Hofreiter presents the choices in the style of a poker player: we shouldn’t be deterred, he says, by Moscow’s “threats” have “been repeatedly proven empty” in the past. This is a dangerous delusion, as Russia’s decision to attack Ukraine on February 24, 2022 demonstrates. Meanwhile, Berlin is set to cross further red lines, this time China’s, by dispatching two German warships through the Taiwan Strait. Yet when it comes to European territorial waters, policy advisors in Berlin have begun to suggest that Berlin should take action against foreign warships sailing through the North Sea and Baltic Sea – at least if those vessels happen to be Russian. Read more

BERLIN/BEIJING (own report) - Economists are warning of a “China shock” for German industry. Increasing numbers of German companies are not only losing market share on the Chinese market to their Chinese competitors but also struggling to compete with Chinese companies in their other export markets. This pattern of decline can be seen in the Germany’s three most important industries. German automotive companies have fallen behind their Chinese competitors in the electric vehicle sector. Mechanical engineering companies from Germany are now languishing in the People’s Republic, while facing burgeoning Chinese competition in third markets. The chemical industry, too, is floundering, badly affected not least by the sharp rise in gas prices. Chemical giants like BASF are hardly able to keep up with Chinese companies, especially in the basic chemicals segment. Plants are being forced into closure. “Germany’s biggest customer is turning into its biggest competitor,” concludes Yanmei Xie, an expert from Hong Kong-based business analysists Gavekal. Specialists have been voicing “concerns about the German export model” as such, as German companies increasingly fail to keep pace with Chinese producers in previously attractive markets. Read more

BRUSSELS/BERLIN/BEIJING (own report) – Shortly before German Economy Minister Robert Habeck’s trip to South Korea and China, there is another twist in the downward spiral of a trade war between the EU and the People’s Republic of China. At the beginning of the week, Beijing launched an anti-dumping investigation into EU pork exports to China. Punitive tariffs are likely to follow. This product group has an annual value of 2.5 billion euros. It will be China’s response to the European Commission announcement that it will impose punitive tariffs ranging from 17.4 to 38.1 per cent on imports of Chinese-made electric vehicles from 4 July. These tariff hikes come on top of the regular import 10 per cent duties. This move by Brussels is highly controversial in Germany. While major car manufacturers vigorously oppose it, the German Economic Institute (IW) reports that a survey of around 900 companies – including lots of small and medium-sized enterprises – showed that some 80 per cent, often ones facing Chinese competition, are in favour of punitive tariffs. The new EU tariffs will also hurt European and US manufacturers that produce cars in China for export. Tesla and BMW are particularly vulnerable. Read more

BEIJING/BERLIN (own report) – Germany and the EU are fast losing economic clout in their trading relations with countries of the Global South. They should “not be surprised” by their parallel loss of political influence. This is the key finding of a recent analysis by the Cologne-based German Economic Institute (IW). The report shows how Germany’s share of trade with relatively strong economies in Asia, Africa and Latin America is stagnating. The EU’s share is declining even more markedly. Meanwhile, China’s share has been rising rapidly and now eclipses that of both the European Union and the United States. This trend is central to understanding why Germany’s “geopolitical weight in the Global South is also in decline,” explains the IW study. It takes Brazil as a case in point: under President Luis Inacio Lula da Silva this important country and BRIC member “is adopting a stance on the Ukraine war and the Middle East conflict that is contrary to the West’s position”, due not least to “the economic importance of China and Russia for Brazil”. The IW argues for decisive measures by Berlin to promote foreign trade with the Global South. Read more

BERLIN/TOKYO/CANBERRA (own report) – Germany’s armed forces are expanding their “Indo-Pacific deployment”. Germany will send almost three dozen military aircraft and two warships to the Asia-Pacific region for war exercises this year. Plans include participation in a large-scale US exercise near Hawaii, an air force exercise in Australia and more military training in Japan, as well as in US-led monitoring of the various sanctions placed on North Korea. Until now, the Germany has only deployed to the Asia-Pacific region units from one military wing at a time: the naval frigate “Bayern” in 2021/22, an air force squadron in 2022, and land army troops in 2023. As the head of the Luftwaffe, Lieutenant General Ingo Gerhartz, has confirmed, the expansion of Germany’s “Indo-Pacific deployment” is intended to demonstrate Berlin’s readiness to participate in military activities against China, in parallel to its military deployment against Russia. For its part, the US is working hard to consolidate its military alliances in East Asia. One aim is to take control of the First Island Chain, to which strategists attach particular importance in the push against the People’s Republic. US media are speaking of a “united front against China”. Read more

SHENZHEN/BERLIN (own report) - The West’s battle against an export offensive by Chinese electric car manufacturers is getting serious. While the EU Commission pushes ahead with its anti-subsidy investigation, which could lead to hefty punitive tariffs on Chinese electric vehicle imports this year, US President Joe Biden has now announced that smart cars from China may pose a risk to American national security. With their cameras and sensors they are deemed capable of spying on the US. This is, Biden says, unacceptable and must be prevented. The biggest threat to Western manufacturers comes from the BYD Group, based in the south-eastern Chinese high-tech metropolis of Shenzhen. At the end of last year they became the world’s largest electric car manufacturer, ahead of Tesla, and are getting ready to expand into North America and, above all, into the EU. The company plans to sell 120,000 electric cars in Germany alone in 2026. This makes BYD a dangerous competitor for the Germany’s legacy automotive companies. Last week, the carmaker made headlines by exporting 3,000 electric cars to Germany in the first of its own specially-built car carrier vessel. Read more

BEIJING/BRUSSELS/BERLIN (own report) - European Commission President Ursula von der Leyen and German Economics Minister Robert Habeck have failed in their attempt to introduce the investment controls into EU legislation demanded by the United States. Both politicians campaigned last year for regulations to screen, control and, if necessary, ban investments by EU companies in specified third countries, above all China. Washington adopted such rules last year and urged its allies to do the same. The European Commission has now come up with watered-down proposals. In its 2023 EU “Strategy for Economic Security”, presented on 24 January 2024, Brussel’s calls for “data” on investments in China and elsewhere to be collected, but is no longer seeking to impose actual controls. The transatlantic plan has failed due to resistance from the European business community, not least German companies. They see this move as a direct threat to their strategically crucial trade with, and operations in, China. As for foreign inward investment into the EU, the existing controls will however be tightened. In addition, there will be stricter regulations governing research cooperation between EU-based universities and partner organisations, especially Chinese institutions. Read more