Public Comment
Comments Regarding the Section
301 Investigations of Acts, Policies, and Practices of Certain Economies Relating to Structural Excess Capacity and Production in Manufacturing Sectors
Federation of German Industries e.V.
Date: 15 April 2026
3. Unfair competition at home and in third markets – a joint challenge
4. U.S. measures should address state-induced overcapacities
5. Germany and the EU as key partners in U.S. reindustrialization
Introduction
BDI welcomes the opportunity to provide input to the Office of the United States Trade Representative (USTR) regarding the Section 301 investigation into alleged structural excess capacity in EU manufacturing sectors.
This process offers an important opportunity to reaffirm the strength of the transatlantic economic partnership and to ensure that policy responses support – rather than inadvertently weaken – our shared transatlantic industrial competitiveness.
Germany and the European Union are market-based economies, and the performance of German industry reflects innovation, productivity, and deep integration into global value chains; it is not driven by state-directed industrial policies. German companies are closely intertwined with U.S. manufacturing through investment, supply chains, and high-value job creation.
At a time when both the United States and Europe face growing pressure from state-driven overcapacities in non-market economies, it is essential that U.S. measures focus on the true sources of these distortions. Actions that unintentionally affect Germany or the EU would risk disrupting integrated production networks and weakening capabilities that both sides rely on.
This submission outlines the perspective of German industry on the investigation’s implications for transatlantic trade and underscores the need for a precise, evidence-based, and partner-focused approach to addressing global market distortions, and in particular excess capacities.
1. Putting Germany’s trade surplus into perspective
Germany’s trade surplus vis-à-vis the United States and other countries is a result of a variety of market-driven factors rather than an explicit exportpromotion strategy or other (trade) policy measures by the government or by the business community. These factors include the international competitiveness of German businesses and their products – which remain strong, though recently weakened by structural difficulties in the German economy – as well as Germany’s substantial foreign direct investment (FDI) position. In addition, Germany’s strong innovation base, the high share of intra-industry trade, and a specialized division of labor further shape trade flows, reinforcing the structural, market driven nature of the surplus. Domestic factors such as demographics, the low level of domestic investment, and a relatively high savings rate – shaped in particular by consumer preferences linked to demographic and cultural factors – play an important role.
Analyses furthermore show that Germany’s export success is largely driven by research and innovation in manufacturing, high productivity, product quality, and niche expertise in industries with high global demand.1 Germany’s trade surplus reflects structural strengths in several key industrial sectors, such as mechanical engineering, the automotive industry, the chemical and pharmaceutical industries, as well as in high-quality intermediate goods – sectors whose products are deeply integrated into U.S. value chains and capital goods production. As a result, German exports function as an integral input to U.S. manufacturing rather than a source of market distortion.
Germany’s longstanding surplus in trade in goods (and deficit in trade in services)with theUnitedStates andalso withtherest oftheworld istherefore best understood as the outcome of competitive strengths, structural economic features, and globally integrated value chains, not as evidence of unfair trade practices.2 At the same time, the United States’ external deficit is driven primarily by its structural savings-investment imbalance.
1 Vladimir Klyuev, “Chapter 8. Germany: Niche Exports and Improved Competitiveness”, in: Hamid Faruqee and Krishna Srinivasan, Global Rebalancing. A Roadmap for Economic Recovery, IMF, 2013.
2 In addition, in selected subsectors such as basic chemicals, the German trade plus towards the rest of the world is generally similar to the U.S. trade surplus. Thus, depending on comparative and competitive advantages, EU and U.S. companies behave in similar ways. Statista, Projection of trade balance in the U.S. chemical industry from 2020 to 2025, by segment, 2026, <https://www.statista.com/statistics/407823/forecast-for-trade-balance-inchemical-industry-in-the-us-by-segment/> (accessed 15 April 2026).
2. Differentiating between export strength and state-induced overcapacities
USTR’s investigations cover many different countries, most of which –though not all – are market- and competition-based economies. It is therefore essential that USTR clearly differentiates between legitimate, market-driven export strength and state-induced overcapacities, which result from government intervention designed to expand production beyond market demand. Germany’s economic system, like that of all other EU member states, is firmly market-based. Germany’s trade surplus alone is not an indicator of state-induced overcapacity or systematic overproduction, nor does it reflect any form of export manipulation. German companies determine investment, production, and export decisions not under government directive, but rather based on market forces, competitive pressure, and global customer demand. Government intervention is limited to establishing regulatory frameworks (e.g. reducing CO2-emissions), safeguarding competition, and deploying targeted industrial policies – none of which extend to directing and controlling output or production levels.
At the same time, Germany’s economy faces a challenging environment. Lower capacity utilization rates in some German sectors – which are mentioned in the Federal Register Note – do not constitute evidence of unfair trade practices. They are consistent with normal economic cycles3 and are currently also caused by long-standing structural challenges in the German economy, including high energy costs, regulation, and demographic change (Germany’s GDP shrank by 0.5% in 2024 and stagnated in 2025 (+0.2%)). Moreover, German industry is under enormous pressure from partly unfair competition, particularly from China – which includes an undervalued Renminbi and state-induced overcapacities. These distortions artificially depress global prices, erode market share for producers operating under market conditions, and contribute significantly to the lower utilization rates seen in German manufacturing.
In short, Germany’s export strength is a function of market competitiveness, not state intervention. Equating market-led performance in Germany and the EU with state-directed overcapacity in non-market economies risks misdiagnosing the root causes of global market distortions and undermines efforts to address them effectively.
3 For the linkage between capacity utilization and business cycles, see, for example, The Federal Reserve Bank of St. Louis, The FRED Blog, Capacity Utilization, 24 January 2019, <https://fredblog.stlouisfed.org/2019/01/capacityutilization/#:~:text=The%20capacity%20index%20tries%20to,Brian%20Reinbold%20and%20Yi%20Wen.> (accessed 23 March 2026).
3. Unfair competition at home and in third markets – a joint challenge
Not only German companies, but also firms across Europe and the United States are increasingly facing unfair competition – both at home and in foreign markets – stemming from non-market economies. In particular, China’s state-directed industrial policies are distorting global competition. Effects of China’s macroeconomic policies include weak domestic demand, import-substitution strategies, targeted industrial planning, and the extensive subsidization of strategic industries. China has built up industrial capacities that lead to artificially low-priced products and aggressive expansion of Chinese companies in third markets, with Europe bearing the disproportionate share of the impact.4 In fact, an analysis by the European Central Bank (ECB) estimates that China now competes directly with euroexporters in nearly 40% of sectors, up from 25% in 2002.5 Some sectors in Germany have been especially affected by these negative developments as China’s industrial policy directly targets sectors in which German firms have traditionally held global leadership. As a result, companies in Germany, Europe and the United States have struggled to maintain their competitive position against these state-supported and artificially advantaged competitors. The consequences are already visible: structural breaks and persistent declines in exports to China, shrinking market shares in third countries and increased competitive pressure in domestic markets. These developments highlight a structural challenge that affects all transatlantic economies and underscores the need for coordinated action to restore fair competition globally.
4. U.S. measures should address state-induced overcapacities
Given these shared challenges, Germany, the EU and the United States must prioritize restoring fair and balanced market conditions and jointly address market distortions. Acoordinatedtransatlanticresponseis essentialto protect mutually beneficial investment flows and foster economic security. We thus strongly advocate for deeper cooperation between the EU, Germany, and the United States to counteract global market disruptions caused by unfair government-induced overcapacity. German industry stands ready to actively contributeto thesediscussions andto workclosely with U.S. partnersin areas where our strategic interests converge, e.g. in protecting critical technologies and intellectual property from adverse actors and diversifying reliable access to critical resources. Collaborative frameworks and joint initiatives can generate synergies, reduce shared risks, and enhance the overall resilience and global competitiveness of our economies. By contrast, the indiscriminate use of tariffs against all trading partners will not only hinder progress in
4 See, for example, Sander Tordoir and Brad Setser, How German industry can survive the second China shock, CER. London, January 2025.
5 Alexander Al‑Haschimi et al., Why competition with China is getting tougher than ever, European Central Bank, 3 September 2024, <https://www.ecb.europa.eu/press/blog/date/2024/html/ecb.blog240903~57f1b63192.en.html> (accessed 9 April 2026).
addressing state-induced overcapacities and towards fair competition in global markets. Above all, such broad measures fail to distinguish between market-based economies and non-market actors and ultimately hamper the competitiveness of companies not only in Germany and Europe, but also in the United States itself. To complement these transatlantic efforts, German industry supports the United States in advancing meaningful WTO reform that directly addresses the root causes of global market distortions. We fully align with U.S. priorities to strengthen transparency and notification disciplines, to confront the nonmarket policies that drive persistent overcapacities, and to expand cooperation through national and plurilateral instruments where the WTO’s current framework falls short. We believe that jointly pursuing these avenues will reinforce fair competition, enhance our collective economic resilience, and deliver tangible progress in restoring balanced and market-oriented global trade conditions.
5. Germany and the EU as key partners in U.S. reindustrialization
Today’s U.S. economy is shaped by services production, including financial and professional business services, alongside technological leadership in areas such as artificial intelligence. European and German industry stand ready to contribute to strengthening manufacturing capacity and industrial resilience in the UnitedStates.German companies already make a substantial contribution to U.S. manufacturing strength, jobs and investment. In fact, Germany is the third largest source of foreign direct investment in the United States, and German companies have more than doubled their investment in the United States over the past decade. German affiliates employ approximately 871,400 people across the United States, making German companies the fourth largest foreign employer in the United States and the second largest in the manufacturing sector. These long-standing German investments in manufacturing-heavy industries are therefore not a competitive threat but a strategic asset for U.S. reindustrialization efforts. They deepen supply chains, expand production networks, and support highvalue employment across multiple states. However, persistently high tariffs without exemptions for industrial goods and precursor products hamper these efforts instead of aiding. The broad use of tariffs is creating significant uncertainty for businesses on both sides of the Atlantic, placing additional strain on the global trading system and disrupting integrated global supply chains on which both U.S. and European manufacturers rely. Over time, such measures ultimately weaken the transatlantic economic partnership and further weaken our shared strategic positions vis-à-vis systemic competitors.
About BDI
The Federation of German Industries (Bundesverband der Deutschen Industrie,BDI)istheumbrellaorganizationofGermanindustryandindustryrelated service providers. The BDI speaks for 38 sector associations, 15 regional offices, and approximately 100,000 companies with a total workforce of about eight million people. In Washington D.C, our liaison office the Representative of German Industry and Trade (RGIT), represents the interests of German industry in the United States on behalf of its principals, the Federation of German Industries (BDI) and the Association of German Chambers of Commerce and Industry (DIHK).
Imprint
Federation of German Industries e.V. (BDI) Breite Straße 29, 10178 Berlin, Germany www.bdi.eu
T: +49 30 2028-0
German Lobbyregister Number: R000534
EU Transparency Register: 1771817758-48
Contact
Matthias Krämer
Co-Director International Affairs m.kraemer@bdi.eu
BDI document number: D 2268