German exporters Experiencing a Withdrawal from Global Market, According to Bundesbank. - Struggling to Keep Pace in Global Market: German Export Industry Under Pressure
In a recent development, the German Federal Bank (Bundesbank) has raised concerns over Germany's declining global market share in key sectors such as machinery, electronics, chemicals, and metallurgy since 2017. This trend, the Bundesbank warns, is primarily due to intensified international competition, structural challenges within these sectors, and shifts in global supply chains and trade dynamics.
The warning points to several factors behind this trend. Increased global competition, particularly from countries investing heavily in technology and innovation, challenges Germany's traditional industrial strengths. Structural shifts in global supply chains and trade dynamics, including the impact of tariffs and geopolitical tensions, have affected Germany’s industrial export base. Potential underinvestment in innovation, digitalization, and modernization within these sectors compared to competitors, as well as macroeconomic factors such as global economic slowdowns and changes in demand patterns, disadvantage established German industries.
To counter this decline, the German authorities and experts suggest solutions that focus on strengthening investment in innovation and technology, promoting digital transformation and modernization, enhancing strategic autonomy by reducing dependencies on foreign supply chains and boosting domestic capacities, and increasing public and private investment in research and development, particularly in future-oriented sectors like climate technology, energy transition, and digitalization.
The German Federal Ministry of Finance and related EU bodies emphasize the importance of mobilizing substantial resources towards sustainable and inclusive growth, which includes bridging investment gaps and focusing on key strategic priorities to preserve Germany’s and Europe’s economic potential.
The German government's initiatives are moving in the direction of reform, but there is a particular need for reform given the aging population and skilled labor shortages. The Bundesbank is advocating for reforms to counter the economic shocks, including strengthening labor incentives, reducing barriers to skilled labor immigration, increasing tax incentives for private investment, lowering energy costs, and reducing bureaucratic burdens.
The COVID-19 pandemic and the increase in energy prices due to the Ukraine war have disrupted supply chains and affected the German economy, particularly the chemical industry. The weakness in exports has significantly contributed to the crisis in the German economy, which is facing a third consecutive year without growth in 2025. Weak global demand for German bestsellers, particularly cars, has exacerbated the problem.
Compared to other countries in the eurozone, the US, and China, Germany has fallen behind on the global market. The call for reforms does not indicate any specific timeline or immediate actions to be taken by the German government. However, the Bundesbank has identified the machinery, car, and chemical industries as key sectors that have been impacted by the deterioration in competitiveness.
It is important to note that the call for reforms does not mention any specific country or trade dispute, but it is known that the export market has been under significant pressure due to the trade dispute with the US. The Bundesbank is headquartered in Frankfurt am Main, Germany. Nearly one in four jobs in Germany relies on exports, underscoring the importance of maintaining Germany's global competitiveness.
- The German Ministry of Finance, in alignment with EU bodies, underscores the necessity of substantial investment in innovation and technology, not just in Germany, but also in future-oriented sectors like climate technology, energy transition, and digitalization, for sustainable and inclusive growth.
- To maintain its global competitiveness, the German government should focus on reducing barriers to skilled labor immigration, lowering energy costs, increasing private investment, and strengthening labor incentives, as suggested by the Bundesbank, to counteract the economic shocks and address the aging population and skilled labor shortages.
