The German political establishment’s so-called firewall against the far right is crumbling. This month, the Alternative für Deutschland (AfD) secured 44 percent of the vote in the state elections in Saxony-Anhalt, and the party is now polling at 37 percent in the upcoming vote in nearby Mecklenburg-Vorpommern. Those alarmed by the AfD’s rise in the former East might take comfort in the fact that the party currently polls at roughly half those levels in the country’s western states. However, there are reasons to think that situation won’t last. A second story unfolding this year is a 12 percent decline in German exports to China as a consequence of Beijing’s muscular industrial policy. Germany’s growing trade deficit with China looks set to prompt mass auto-sector layoffs, which would likely boost the AfD to similar levels in the country's former West.
American economists coined the term “China Shock” in the 2010s to make sense of the loss of US manufacturing capacity and the tendency among those left behind by deindustrialization to vote for right-wing Republican candidates. Their story went as follows: In the wake of China’s admission to the World Trade Organization in 2001, American manufacturing—specifically in the low to medium range of furniture, toys, and electronics—faced stiff import competition. In the first decade of the new millennium, the United States experienced a 33 percent drop in manufacturing employment, while its imports from China rose by a staggering 264 percent.
Offshoring of production further accelerated manufacturing layoffs. In China, hundreds of millions of agricultural workers migrated to burgeoning manufacturing hubs like Shenzhen and Dongguan from the 1980s onwards, creating an almost limitless pool of cheap labor. As a Special Economic Zone, Shenzhen offered tax breaks and export-oriented policies, creating incentives for foreign producers to offshore their operations. American firms soon began to produce in China at a fraction of the cost. After 2000, Apple, Dell, and HP all moved their laptop and smartphone production to China, where they partnered with contract manufacturers like Foxconn and Pegatron, plugged into Chinese supply chains, and were able to ramp up production rapidly and at scale. According to the US Bureau of Labor Statistics, a total of 3.5 million American manufacturing jobs were lost between 2000 and 2010 to import competition and offshoring.
The total number of laid off workers may seem like a drop in the ocean of a 159-million-strong labor force, but concentration, not scale, is what made the shock politically explosive. As the economist David Autor has shown, the manufacturing losses eviscerated entire communities in the Southeast and the Industrial Midwest. In West Hickory, N.C., once the “furniture capital of the world,” manufacturing jobs plummeted from 34.1 percent in 1990 to just 15 percent by 2016. In Martinsville, W. Va., once the “sweatshirt capital of the world,” the manufacturing share of employment nosedived from 45.1 percent to 13.4 percent over the same period.
“A survey of the social consequences of the China Shock makes for grim reading.”
A survey of the social consequences of the China Shock makes for grim reading. The laid-off workers mostly stayed unemployed, and in the affected counties, welfare payouts tripled, with low-skilled white males most affected by long-term unemployment. The consequences included soaring alcoholism and drug abuse, crumbling marriages, and a surge in “deaths of despair”: a combination of suicides, overdoses, and liver disease. Beyond the personal and social devastation, the trade shock’s most explosive fallout may have been political. Autor and his colleagues found that the hardest-hit districts veered sharply to the right, suggesting a stark correlation between deindustrialization and extreme political polarization. Their models suggest that the effects of the China Shock in deindustrializing parts of Michigan, Wisconsin, and Pennsylvania played a pivotal role in Donald Trump’s 2016 victory.
Autor is careful to describe the China shock as a catalyst, rather than a cause, of Trump’s rise. Similar right-wing surges among blue-collar voters occurred in the Netherlands, Sweden, and France, none of which faced comparable import competition, as well as in Germany, where the AfD built its eastern base during the 2010s. But the China Shock did not have to be the sole cause of America’s rightward shift to be decisive. In swing states on a razor’s edge, a small shift often determines an election.
Germany was mostly spared the China Shock because its industry was concentrated in the high-end manufacturing sector, where China was yet to compete. Indeed, Germany’s economic story during the first two decades of the twenty-first century was in many ways the opposite of America’s. While US exports to China drastically contracted during the 2000s, German exports to China skyrocketed by 227 percent, growing at four times the rate of its exports to the rest of the world. Between 2003 and 2019, China and Germany forged a powerhouse partnership: German automobiles, machinery, and chemicals helped industrialize China, expanding its industrial base and growing its middle class, while China’s insatiable demand became the engine of German prosperity.
Germany’s error was to mistake this temporary grace period for a permanent advantage. When Chinese exports to the United States plateaued after the Great Financial Crisis eroded American buying power, Beijing refused to remain the West’s low-cost workshop. Instead, it pursued a deliberate strategy to close the technology gap with advanced economies. By the 2010s, Chinese manufacturers had moved into high-value sectors, directly competing with Germany in the production of machinery, robots, and automobiles. Backed by a coordinated state effort at every level of government, and fueled by relentless investment in engineering talent, education, and R&D, China’s firms unleashed a second wave of export growth directed at the European market.
The result is that today, Germany faces its own China Shock. The numbers illustrate the scale of the reversal. Since their high in 2021, German exports to China as a percentage of GDP have plummeted by over 40 percent. If the recent decline were to continue for three more years, exports would fall below what Germany exports to Austria or Switzerland. At the same time, imports from China rose 8.9 percent in 2025 alone, pushing Germany’s trade deficit with China to a record $104 billion.
“At the heart of the collapse is the vaunted German car industry.”
At the heart of the collapse is the vaunted German car industry. By remaining wedded to the internal combustion engine as China invested in EV production, German auto makers have been left behind for the first time in history and are paying a steep price. With many Chinese motorists preferring to buy domestically produced vehicles, German car exports to China fell by 66 percent between 2022 and 2025, reaching their lowest level since 2009. Since 2022, Porsche’s share has fallen 61 percent, while Volkswagen’s China joint-venture profits have dropped 60 percent. Meanwhile, China’s car exports have surged, hitting the 10 million a year mark in 2025, which analysts hadn’t expected to see until 2030. Even in the streets of Berlin, it is increasingly common to see cars made by BYD, Polestar, or MG Motor, as Chinese EVs technologically outcompete German ones at a fraction of the price. As German automakers are simultaneously pushed out of China and squeezed at home, the panic around job losses has hit. Over the next few years, VW is set to close at least three factories and cut 30,000 jobs in Germany.
The German automotive sector accounts for a quarter of domestic industrial revenue. Together with mechanical engineering, chemicals, and electrical technology, German industry makes up 20 percent of the country’s economic output, surpassing any other European country. In contrast to other countries, the German industrial model is disproportionately reliant on exports. Germany ranks as the world’s third-largest exporter after China and the United States, but while exports account for just 10 percent of US GDP and 20 percent of China’s, they make up a staggering 40 percent of Germany’s economy. This export prowess is now turning into a liability, with China not only reversing its trade deficit with Germany but also increasingly rivalling German manufacturers in third markets worldwide. The risk to industrial jobs is acute. According to Jürgen Matthes of the Cologne Institute of Economic Research, at the peak of Germany’s export boom in 2021, around a million German jobs, or 2.5 percent of total employment, directly depended on the Chinese market. Since then, it is estimated that about half of these jobs hang in the balance due to the collapse of Chinese exports.
Predicting how laid-off workers might vote is a speculative endeavor. However, according to the economist Lutz Schneider, who studied the political repercussions of different waves of deindustrialization in Germany, the AfD vote is strongest in places where a long industrial tradition meets a sharp employment decline. A compelling example is Pirmasens, once the center of Germany’s shoe industry in southwestern Palatinate. As foreign import competition hollowed out the sector over the last 30 years, industrial employment plummeted by 50 percent. The political fallout was stark. In the 2017 federal election, the AfD captured 16 percent of the vote, one of its strongest results in western Germany at the time. In last year’s Bundestagswahl, the party’s vote share reached 25 percent.
Like West Virginia and North Carolina, Pirmasens suggests that the rapid collapse of historic industrial sectors drives gains for right-wing populism. Germany’s China Shock neatly fits this pattern, with jobs in established strongholds like Bavaria, Baden-Württemberg, and Lower Saxony now threatened by a sudden contraction, just as they were in the United States. But instead of an import-driven shock of low-value competition, Germany now confronts an export-driven shock, in which China’s industrial ascent replaces German goods in global markets. This looks more like decimating Silicon Valley than closing the garment sector of North Carolina.
According to analysis by EY, Germany shed 124,100 industrial jobs last year alone. In the automotive sector, one in seven jobs has disappeared over the last six years. While the AfD already polls at over 40 percent in East Germany, it stands at roughly 20 percent in Germany’s industrial heartlands. Bavaria and Baden-Württemberg were never AfD strongholds—immune, until recently, to the social decline and reunification trauma that built the party’s base in the east. If deindustrialization is now doing in the west what post-reunification grievances did in the east, the AfD’s West German results may soon mirror those of its East German peak.
The fact that German leaders didn’t anticipate China’s rise is a testament to their geopolitical arrogance. They assumed that integration into global trade would naturally lead to deregulation, privatization, and free trade. Instead, China opened its markets enough to attract foreign investment and technology transfers, while shielding strategic sectors from full competition. Where the German playbook envisaged the state retreating as markets grew, China’s state capacity expanded as it poured resources into infrastructure, education, and R&D.
German economists complain that Chinese subsidies distort competition, but they have less to say about the practice of automakers funneling profits into shareholder payouts instead of reinvesting in production. In 2023, Volkswagen paid out $11 billion in dividends, while its EV transition lagged far behind Chinese rivals. With the chips and the dividends down, Germany is now scrambling to shore up its industry with protectionist measures, joining France’s call to regulate trade with China through tariffs, import reductions, and price controls. However, companies like Siemens, BASF, and Volkswagen have cautioned against imposing stricter tariffs for fear of retaliatory measures that would further reduce their share of the Chinese market.
“The AfD offers no way out of this bind.”
German Chancellor Friedrich Merz must therefore choose between protecting the profits of Germany’s national champions and admitting those champions can no longer compete without EU-wide measures that stop Chinese EVs from beating them on their home market. The effect on German jobs, meanwhile, risks being zero-sum: Maintain free trade with China, and you preserve export-dependent jobs at the cost of those that rely on protection from Chinese imports; impose trade barriers to protect domestic workers, but risk endangering export jobs through Chinese retaliation. The AfD offers no way out of this bind. In fact, its manifesto doubles down on free trade, committing to rolling back “economically damaging sanctions” on China with no plan for the unemployment this is set to create. Nonetheless, it is positioned to capitalize on voters’ disillusionment with the establishment in areas where industry is facing collapse.
Within Europe, Spain has pursued an alternative approach that German leaders could do well to learn from. The continent’s second largest car producer, with 600,000 auto jobs and a sector worth 10 percent of GDP, Spain has treated Chinese capital not as a threat to be fended off with tariffs but as a lifeline. It has marketed itself as China’s gateway to Europe, inviting SAIC, Chery, CATL, and Leapmotor to reactivate idle plants like Nissan’s former Barcelona factory in exchange for jobs, technology transfers, and local production commitments.
Madrid’s strategy is a mirror of the one Beijing pursued in relation to Germany two decades ago: Open the market enough to capture investment, know-how, and job growth, while using the state, rather than the market, to set the terms. Germany already welcomed foreign industrial capital when it allowed Elon Musk to build a Tesla gigafactory outside Berlin. It is time to extend the same logic to China. An industrial base that absorbs Chinese direct investment and expertise on terms that benefit German workers would be a more honest reckoning with the end of the country’s industrial supremacy. Without such a change in strategy, the AfD will keep feeding off the discontent of workers abandoned by an elite too proud to accept the new reality.