Germany in the pillory: Why the US and China are really badmouthing us
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Published on: August 27, 2025 / Updated on: August 27, 2025 – Author: Konrad Wolfenstein
Germany in the pillory: Why the US and China are really badmouthing us – Image: Xpert.Digital
Worse than expected? The truth behind the criticism of the German economy
### Germany's forgotten superpower: This strength is completely overlooked by our critics ### The crumbling facade: How the US and China hide their real problems from the world ### Germany's ingenious counter: How we use our strengths against US protectionism and AI dominance ###
More than just AI: Why Europe's mechanical engineering is the secret foundation of the digital world
Germany is under fire internationally: faltering economic growth, a struggling infrastructure, and a sluggish energy transition seem to paint a picture of a nation in decline. But while these problems are real and must be addressed, public perception only scratches the surface. This critical outside perspective is often part of a larger geopolitical narrative, deliberately fueled by global competitors like the US and China—two superpowers grappling with their own massive and often concealed problems, from a struggling Chinese real estate industry to aggressively protectionist US trade policies.
What is often overlooked in this debate, however, are the fundamental strengths of Europe, and Germany in particular, often dismissed as "old-fashioned." While the world gazes in fascination at the US's AI dominance, Europe's physical infrastructure—above all, its unrivaled mechanical engineering—forms the true backbone without which digitalization would be unthinkable. This analysis uncovers the hidden weaknesses of the global superpowers, illuminates Europe's strategic advantages, and presents a clear path for Germany to solve its real-world problems while confidently leveraging its unique position as a bridge between proven engineering prowess and digital sovereignty for the future.
Germany in the international spotlight: challenges and strengths in a complex world
Why is Germany criticized internationally?
Indeed, criticism of Germany and its economic situation is often found in many international media outlets. But is this criticism justified, or is it a distorted picture? Current figures paint a mixed picture of the German economy. Gross domestic product is expected to grow by only 0.2 percent in 2025, while other major economies are experiencing significantly stronger growth rates. Deutsche Bahn is struggling with punctuality problems, which have been exacerbated by external factors such as arson attacks, extreme weather, and technical malfunctions. The energy transition is certainly making progress, with over 50 percent of electricity generation coming from renewable energies, but it still faces major challenges.
These problems are real and certainly warrant criticism. Nevertheless, the question remains whether the international portrayal reflects the full reality, or whether certain actors have an interest in portraying Germany as weaker than it actually is.
Are China and the US hiding their own problems?
China likes to present itself as a success story, but the official figures conceal significant structural problems. Independent experts cast doubt on China's economic growth forecast of five percent for 2024, estimating actual growth at only 2.4 to 2.8 percent. The People's Republic is struggling with weakening consumer demand, a struggling real estate sector, and high local government debt. Falling producer prices, stagnating consumer prices, and youth unemployment of 16 percent point to serious economic difficulties. Economic institutions forecast average growth of only 4.4 percent for 2025 and as low as 4.1 percent for 2026.
The United States pursues an aggressive trade policy, with an average tariff rate of 17.6 percent—the highest level since 1934. This protectionist stance demonstrates that the American economy is also under pressure, and that external markets are perceived as a threat to domestic industry. The trade conflict with Europe and other partners indicates that the United States must maintain its global dominance through economic pressure.
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How aggressive is US trade policy towards Europe?
US trade policy under President Trump has been particularly aggressive toward Europe. The originally threatened 30 percent tariffs on all EU goods starting in August 2025 have not materialized. Instead, a trade agreement between the US and the EU was agreed in July 2025 that sets a 15 percent tariff on most EU exports to the US. While this is higher than the previous 10 percent, it is significantly lower than the originally threatened 30 percent.
For steel and aluminum, the 50 percent tariffs, which have been in place since June 2025, remained in place. These had previously been increased from 25 percent. However, the US and EU are working on a quota system to reduce these tariffs for historical export volumes.
Trade balances: reality vs. representation
The EU's trade surplus with America in 2024 actually amounted to €198.2 billion in goods, not the claimed "almost €200 billion." However, looking at the overall trade deficit (goods and services), a more nuanced picture emerges: The US trade deficit with the EU amounted to only $58 billion in 2024, as the US maintains a significant services surplus of $88.6 billion (other sources estimate up to €112 billion) with the EU.
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- In truth, the Magnificent 7, according to estimates, ensure a US trade surplus of EUR 112 billion (2023) to the EU
- Unequal trade balance USA-EU? Digital US services are missing-Revaluation of transatlantic trade is necessary!
German steel industry: Limited direct impact
The claim that Germany exports "about 20 percent of its total crude steel to the United States" is greatly exaggerated. In fact, the United States accounted for just over 6 percent of German iron and steel exports and ranked as the sixth-largest export market. Germany exported €1.9 billion worth of steel and related products to the United States in 2024, a relatively small share of Germany's total steel exports of €20.7 billion.
Complexity of trade relations
The interrelationship of economic relations is far more complex. Approximately 30 percent of the EU's trade surplus with the US is accounted for by trade between European subsidiaries of US multinational companies. This means that tariffs also affect US companies that produce in Europe.
Current developments and tensions
Despite the trade agreement, tensions remain. In August 2025, Trump threatened "significant additional tariffs" against countries that legislate against American technology companies. The EU defended its sovereign right to regulate and warned that such measures could undermine the trade agreement.
Economic impact and criticism
The 15 percent tariff agreement was criticized by European leaders. German Chancellor Friedrich Merz described it as causing "significant damage," while French Prime Minister François Bayrou called it a "black day" for the EU. EU Trade Commissioner Maroš Šefčovič nevertheless called it "the best agreement under very difficult circumstances."
US trade policy under Trump is protectionist. While the actual trade agreement, with 15 percent tariffs on most EU goods, represents a deterioration compared to the status quo ante, it avoids the more drastic measures originally threatened. However, the 50 percent steel and aluminum tariffs remain a significant burden for affected industries.
How is the US trying to leverage its AI dominance against Europe?
The US AI strategy is clearly aimed at expanding global tech dominance. With AI investments of $67.2 billion in 2023—8.7 times higher than in China—the US dominates the global AI ecosystem. While private AI investments declined in China and the EU, they rose by 22.1 percent in the US.
This dominance is being strategically used to push Europe into a position of dependence. Approximately three-quarters of listed companies in Europe rely on American technology firms for their business operations. This dependence is particularly evident in cloud services, where US providers control over 70 percent of the European market. Countries such as Iceland, Norway, Ireland, Finland, and Sweden rely on US tech companies for more than 90 percent of their business.
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The US is exploiting this dependence to construct a doomsday scenario for Europe if it doesn't adopt American cloud, AI, and IT solutions. This is a deliberate marketing strategy to undermine European autonomy and strengthen its own market position.
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What are Europe's hidden strengths in physical infrastructure?
While attention is focused on digital technologies, Europe has fundamental strengths in its physical infrastructure that are often overlooked. European mechanical engineering generated sales of €867 billion in 2024 and employed approximately three million people. Germany alone exported machinery worth €200 billion, accounting for one-third of EU machinery exports.
This physical infrastructure forms the true backbone of digitalization. Without functioning mechanical engineering, precise manufacturing facilities, and robust production infrastructure, AI and digitalization cannot achieve their full potential. Digital transformation is fundamentally based on physical structures such as data centers, manufacturing facilities, and transportation infrastructure.
Europe, and Germany in particular, has built tremendous stability in this area. EU mechanical engineering maintains a foreign trade surplus of €165 billion. This strength in real production can be further enhanced through digitalization, rather than weakened by foreign dependence.
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Europe vs. USA: The secret infrastructure strategy
Why is the US weak in productive infrastructure?
While the US dominates the digital sphere, significant weaknesses are evident in its physical manufacturing infrastructure. American mechanical engineering accounts for only 13 percent of global machine sales, compared to the EU's 27 percent. For decades, the US has outsourced its production capacity and focused on services and digital technologies.
This strategy is now taking its toll, as the US realizes that it has become dependent on other countries for critical infrastructure and production facilities. The aggressive trade policy is also an attempt to close these production gaps through coercion rather than building its own capacity.
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How can Europe develop digital sovereignty?
Europe has recognized that digital sovereignty is crucial for its future. Through initiatives like GAIA-X, the EU is working on a European data infrastructure involving over 300 companies. The EU strategy "A Europe Fit for the Digital Age" includes a European data strategy and measures on artificial intelligence.
Digital sovereignty does not mean isolation, but the ability to independently shape and control digital infrastructures, data, and technologies. Europe can build on existing alternatives in many areas, such as cloud infrastructure, communications, and collaboration. The key lies in combining European values such as data protection and democracy with technological innovation.
What are Europe's strategic advantages?
Europe boasts several strategic advantages that are often underestimated. The European single market, with 450 million consumers, offers enormous potential for digital services. The strict data protection standards of the GDPR can become a competitive advantage as trust becomes increasingly important in the digital economy.
Europe's physical manufacturing infrastructure is not only stable but also highly developed. Building Information Modeling (BIM) and digital twins demonstrate how European engineering can be combined with digitalization. Sustainable infrastructure development and the energy transition can make Europe a pioneer in green technologies.
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What role does the physical basis play in digitalization?
Digitalization isn't an abstract phenomenon, but is based on very real, physical principles. Data centers require precise air conditioning and stable power supplies. AI training requires specialized hardware and chips. Autonomous vehicles need precise sensors and mechanical components.
Europe and Germany hold a strong position in these enabling technologies. The German mechanical engineering industry produces the equipment necessary for chip manufacturing, data centers, and automation. This physical expertise is harder to copy than software and offers long-term competitive advantages.
Should Europe remain calm and work on the problems?
The response to international criticism and challenges should not be panic or hasty reactions, but a sober analysis of one's own strengths and weaknesses. Europe and Germany certainly have problems that must be addressed. Deutsche Bahn's infrastructure problems, the slow economic recovery, and the challenges of the energy transition are real and require decisive action.
At the same time, the fundamental strengths should not be overlooked. The strong manufacturing base, the leading position in mechanical engineering, and the progressive digitalization of infrastructure provide solid foundations for the future. Instead of being intimidated by foreign narratives, Europe should confidently set its own standards and build on its strengths.
What can Germany do specifically?
Germany and Europe should take several strategic steps. First, accelerate infrastructure modernization, particularly in rail and digital infrastructure. The new German government's planned investments in infrastructure and defense can provide important impetus here.
Second, the consistent development of digital sovereignty. The German administrative cloud and European cloud initiatives must be advanced. Companies should conduct dependency analyses and gradually switch to European alternatives where appropriate.
Third, strengthening the physical production base through digitalization. Building Information Modeling, digital twins, and intelligent automation can further increase the efficiency of European production. The combination of proven engineering and digital innovation is a unique selling point that should be expanded.
How should Europe respond to US protectionism?
The EU-US tariff deal of July 2025 demonstrates that Europe can respond pragmatically to American protectionism. While critics may see the renunciation of retaliatory tariffs as a weakness, it protects European consumers from rising prices. More important is the long-term strategy of strengthening one's own competitiveness rather than becoming entangled in destructive trade wars.
Europe should keep its markets open, but at the same time develop strategic autonomy in critical areas. This does not mean autarky, but rather the ability to remain viable in times of crisis and to set its own standards.
What role does trust play in the digital economy?
An often overlooked advantage of Europe is its growing distrust of American and Chinese tech giants. Data protection scandals, surveillance fears, and geopolitical tensions are leading many companies and governments to seek more trustworthy alternatives.
Europe can gain this trust through transparent, democratic, and privacy-friendly technologies. A "Made in EU" brand for digital products and services based on European values could become a real competitive advantage.
What does this mean for the future?
The international criticism of Germany and Europe is partly justified, but also driven by self-serving motives. China and the US have their own significant problems, which they try to conceal while portraying Europe as weaker than it actually is.
Europe has fundamental strengths in physical infrastructure and production, which form the true foundation for digitalization. These strengths can be further developed through intelligent digitalization strategies and the development of digital sovereignty.
The challenge lies in addressing the real problems without being intimidated by foreign narratives. Europe should work calmly but decisively to modernize its infrastructure, strengthen its digital autonomy, and combine its proven strengths in physical production with digital innovation.
Success will not be measured by whether Europe resembles the US or China, but by whether it finds its own path and can assert its values and interests in an increasingly digitalized world. The foundations for this are there – it's all about using them intelligently.
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