Germany is preparing a comprehensive set of economic-security measures designed to shield its strategic industries from Chinese competition. Chancellor Friedrich Merz’s government is targeting cabinet approval by October 14, 2026, with tariffs on plug-in hybrid electric vehicles at the center of the effort. Berlin has also proposed mandatory joint ventures for certain investments, stricter investment screening, and expanded export controls. German automakers, led by Volkswagen, face intensifying competitive pressure from Chinese firms benefiting from state subsidies estimated to account for roughly 60% of their global market share gains. Paradoxically, while Berlin’s political rhetoric has shifted toward de-risking from China, German companies increased their investment in China by approximately 5.6 billion euros in the first half of 2026.
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