Caught in Geopolitical Fragmentation: How to De-risk Germany´s Economic Model

Stagnating globalisation, the possible weaponisation of dependencies by autocracies, and US-China tensions threaten to disrupt Germany’s export-driven economic model. But German efforts to ‘de-risk’ that model remain underdeveloped, as does its policy toolkit. Germany’s most important trade relationship is with China. Germany’s import, export and investment exposure to an increasingly mercantilist and possibly aggressive China pose considerable risk to its comparative advantage and security. But the range of policy-levers required to address these– such as export controls or industrial policy – needs upgrading. Given Germany’s deep integration into the European economy, they also need to be defined much more consistently across the state, federal, and EU level. Successfully managing China-related risks can serve as a template for an integrated EU de-risking policy toolkit to make Germany’s model more resilient.