Germany's largest companies are deeply entangled with rival businesses in China and the US, and unable to escape either superpower, according to new research co-authored by King's College London academics.
While it is widely known that Germany is caught between the US and China, this new research shows the reality runs much deeper. Moving beyond aggregate trade data, the researchers mapped sales, production, and supply chain exposures of firms listed on the DAX and MDAX stock indices to find German industry is woven into both superpowers at every level - specifying the dangers of this predicament for individual firms and sectors.
As hostile tariffs continue to shake the global business landscape this study reveals the impossibility of conceding to US pressure to decouple from China without serious economic consequences.
The study was authored by Joseph Baines (King's College London), Julian Germann (University of Sussex), Steve Rolf (University of Sussex), and Sean Kenji Starrs (King's College London).
The researchers found that most large German firms have deepened their revenue ties to both the US and China over the past decade, leaving them more exposed than ever to superpower rivalry. Across industries, dependencies take different forms. Carmakers and machinery firms rely most heavily on the Chinese market, chemical and pharmaceutical companies depend on the US as a site of R&D and production, while digital, telecoms and semiconductor firms are highly dependent on suppliers in both countries. But even within these industries, individual firms face divided pressures, relying, for instance, on Chinese supply chains and US markets.
The trade war between the US and China has led to profound challenges for Germany, and indeed other European countries. Facing mounting pressure from both sides, Germany's economic entanglements render it unable to align with either superpower or to effectively hedge between them.
Dr Joseph Baines, King's College London
Dr Steven Rolf, said: "Leading industrial players like Siemens and BMW were built in a fundamentally globalised system and can't decouple from either China or the US without devastating losses and in some cases, what look like impossible practical problems. It's not as simple as picking a side. No corporate block can clearly identify where its interests lie, which goes a long way to explaining why Berlin can't form a coherent strategy."
As hostile trade moves between China and the US intensify, both states are using tariffs, financial sanctions, export restrictions and company blacklists to strengthen their position in the global economy. Today's study reveals how these tensions are playing out in financial losses and difficult decisions for German businesses.
Examples from the study:
- BMW generates more revenue from China than from the US and manufactures a quarter of its vehicles there, depending on Chinese battery giant CATL for more than €1.4bn in supply chain inputs. At the same time, the US represents a vital source of revenues and supply chain inputs. Germany's big three automakers now face a $10bn+ tariff hit from the Trump administration on vehicles exported from China. The researchers found that the carmaker cannot de-risk from either side without seriously damaging relations with the other.
- Siemens, Germany's largest conglomerate, derives 24 per cent of revenues from the US market, where its Healthineers division depends on American healthcare spending, yet 12% from China, where it has 18% of its suppliers and a substantial manufacturing footprint. With a quarter of its supplier relationships in the US and nearly a fifth in China, the researchers found no viable de-risking path for Siemens that doesn't inflict serious damage on its business model.
