What Berlin Is Planning
Germany is pressure-testing where it's vulnerable to China and sketching out defenses for strategic sectors. Ministries are mapping weak spots and countermeasures, and while the ideas are still being assembled, there isn't a single draft yet. A spokesperson for the economy ministry declined to comment, and cabinet agreement isn't guaranteed.
Chancellor Friedrich Merz's team is aiming for Oct. 14 cabinet approval, then broader EU support. Berlin and Paris are working toward a joint position paper to rally other EU members at an October summit in Brussels, ahead of separate talks with Beijing later that month. Merz has signaled the tougher line, saying earlier this year, "we underestimated China's power and economic strength," and calling it "a major strategic turning point."
Measures Under Consideration
People involved in the effort say the menu ranges from trade-defense steps to public purchasing, supply-chain obligations, and critical-minerals policy, as well as investment-screening rules and tighter tech controls. Options being studied include mandatory joint ventures, stronger oversight of investments coming into and going out of Germany, and an upgraded export-controls regime, alongside potential new tariffs on hybrid electric vehicles.
Policymakers are considering beefed-up local-content carrots and buying preferences, wider deployment of the EU's International Procurement Instrument, and tougher mandates to broaden supplier bases and sources of critical minerals. They are also studying whether to ratchet up export restrictions - possibly sweeping in cutting-edge AI tools and chip-making gear - because of worries that certain products end up serving military purposes despite not being listed under today's dual-use regime.
Inbound screening could be broadened beyond today's "public order" or "security" test to include "economic resilience" and "strategic dependencies" or "asymmetries." A fresh law to govern investment screening is already in the works. The outbound dimension is proving more contentious: officials in parts of the government advocate creating a mechanism to scrutinize - and, where warranted, curb - German investments directed to China in sensitive areas, pushing past the EU's voluntary emphasis on semiconductors, AI and quantum, a step that free‑market figures within Merz's Christian Democratic Union are likely to resist.
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Subsidies could be steered toward bolstering fragile links in value chains, for example by funding alternative sources and expanding processing capacity for critical raw materials. Officials point to tungsten as a case in point - machinery makers rely on it for cemented carbides - and dependence on Chinese supply is considered elevated.
Politics, Industry Pressure and Existing Steps
Berlin has grown more hawkish as Chinese firms quickly climb the value ladder, putting fresh pressure on Europe's car and machinery makers. Vice Chancellor and Finance Minister Lars Klingbeil has gone on record backing an expansion of EU tariffs to include plug-in hybrids manufactured in China, and he has floated requiring some Chinese companies to set up Europe-based joint ventures with a controlling European stake. He has also backed "Buy European" preferences.
Sales across Europe of Chinese-made plug-in hybrids are gaining speed; Dataforce said July set a record, with one third of registrations coming from marques such as Chery Automobile Co.'s Jaecoo. Affordable hybrids are finding buyers as household finances stay tight and gasoline prices rise due to the Middle East conflict.
Bloomberg Economics put the competitive squeeze bluntly: "European producers face more direct competition from China - at home, in third markets and in China itself." In 2025, Germany's shipments to China dropped 9.7% to €81.3 billion, whereas purchases from China rose 8.8% to €170.6 billion. The EU is currently running a trade shortfall with China of more than €1 billion per day. At home, an industrial slump has led companies to announce job cuts numbering in the tens of thousands, and Volkswagen AG intends to lift worldwide reductions to 100,000. Merz has further charged that China is holding the yuan artificially weak, asserting it is undervalued by 25% to 30%.
Networks, Next Steps and What It Means For You
Germany has already moved to reduce reliance on Chinese telecom suppliers. Officials are looking at whether to extend that approach to other critical parts of digital infrastructure.
For your wallet, this is about the cost and availability of the stuff you buy and the jobs that make it. If pieces of this package land, expect tighter rules on cross-border deals, more rigorous sourcing standards for critical inputs, and procurement preferences that can shift where factories and supply lines are built. Export controls could change which technologies move abroad and how fast, and that can ripple into prices and product timelines in everyday life.
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