Klement: Germany Loses Core Manufacturing Market Share; Tariffs Cannot Replace Innovation
Investment blogger Joachim Klement cites research data from the Kiel Institute for the World Economy (2026), pointing out that between 2012 and 2024, German manufacturers lost third-party market share in core areas such as automobiles, machinery, electrical equipment, and optical/medical devices at a rate exceeding the European average. He argues that Chinese products have surpassed German manufacturers in quality and innovation, and that tariffs cannot address the fundamental problem of insufficient innovation.
Researchers Chowdhry et al. at the Kiel Institute for the World Economy measured changes in market share between Chinese and EU companies in third markets during two periods: 2012–2014 and 2022–2024. The results show that, with the exception of leather goods (mainly luxury items like handbags), art, and weapons, EU manufacturers generally lost market share in third-country markets, while Chinese manufacturers gained share.
In his newsletter dated October 27, 2026, investment blogger Joachim Klement cited this data to highlight a more specific finding: German manufacturers' market share declined significantly faster than the European average, and this loss was concentrated in their core areas of strength—automobiles, machinery, electrical equipment, and optical and medical equipment.
Klement believes this pattern hints at an issue many German manufacturers still deny: German manufacturing products have been overtaken by Chinese goods not only in price but also in quality and innovation. He wrote that tariffs will not help non-innovative manufacturers survive.
He used the German automotive industry as an example, noting that future-oriented technologies require substantial investment, yet looking at the current state of the German auto industry reveals they are not making these investments.
Klement's argument does not deny the existence of price competition but suggests that price alone is no longer sufficient to explain the situation. If Chinese products surpass German manufacturers in both quality and innovation, protective tariffs can only delay rather than resolve competitive disadvantages. For investors, this means that when evaluating European industrial companies, the key question is not whether they face Chinese competition, but whether they are allocating sufficient capital toward future-facing technologies.