German Firms' China-US Dilemma: Decouple or Devastate?

German corporations are deeply embedded within both the United States and Chinese economies, facing severe financial repercussions if they attempt to sever ties with either. Research conducted by the University of Sussex and King's College London mapped the sales, production, and supply chain exposures of major German companies.

The study indicates that automotive and machinery sectors are particularly dependent on China for sales. Conversely, chemical and pharmaceutical businesses exhibit a stronger reliance on the U.S. for crucial research, development, and manufacturing activities. Companies in the digital, telecommunications, and semiconductor industries find themselves highly exposed to suppliers located in both of these global economic giants.

Leading figures in German industry, such as Siemens and BMW, were established within a globalized framework and cannot easily detach from either China or the U.S. without incurring significant losses. For instance, BMW generates more revenue from China than from the U.S. and depends on Chinese supplier CATL for substantial input value. Siemens derives a notable portion of its revenue from the U.S. and also has substantial Chinese market engagement, alongside supply chains exposed to both nations. These findings present a significant challenge for German policymakers seeking to formulate a coherent strategy amidst escalating U.S.-China geopolitical tensions.