In the previous article, “Germany’s Deindustrialization Is a Capital Coup,” I proposed that the systematic dismantling of the nation’s industrial base is not an accident, but the deliberate assent of financial over industrial capital. We now see the final, brutal stage of this process: the forced reorientation of European capital; on the one hand extracted by the United States and on the other redeployed to China, leaving the continent’s industrial core a hollowed-out shell.
The EU’s so-called “trade rebalancing agreement” with the United States, finalized in July 2025, was not so much a deal but unilateral surrender. It effectively formalized Europe’s status as a vassal economy. With punitive tariffs of 15% on most EU exports and rates of 50% on steel and aluminum, the transatlantic trade corridor is increasingly becoming a one-way street. Subsequent clauses, like $750bn in forced purchases of overpriced U.S. LNG and a $600 billion mandate on American arms imports, are not trade terms; they are a protection racket, systematically draining European capital and locking the continent into long-term energy and military dependency.
Germany’s financial elite—that viewed high-cost factories in the Ruhr as underperforming assets and started this process of deindustrialization with the closure of Germany’s nuclear power sector—is now having its hand forced by increasingly coercive U.S. trade practices. The threat of exclusion from the U.S. market by tariffs and Biden-era IRA-style subsidies and the unavoidable necessity of access to the Chinese market provided a moment of clarity.
The choice for capital was simple: Deindustrialize, financialize and diversify your assets between China and the U.S. In this light, E.U. talk of “de-risking” from China is political cover.
Under the threat of exclusion from U.S. markets, BMW and Mercedes have already begun relocating battery and electric vehicle production to U.S. soil. However, a Rhodium Group report reveals that even as these automakers pledge billions to new factories in South Carolina they are doubling down on China.
“To a greater extent than ever before, EU investments in China are being driven by Germany and its carmakers. German FDI made up 57% of total EU investments in China in the first half of 2024, 62% in 2023, and a record 71% in 2022. This was driven by auto-related FDI, which has accounted for roughly half of all EU investment in China since 2022.”
Don’t Stop Believin’: The Inexorable Rise of German FDI in China – Rhodium Group Report
This is not diversification, it’s the rational, calculated flight of capital. Europe’s “deindustrialization” is a deliberate, two-front campaign. On the Western Front, Washington’s coercive trade architecture and financial subsidies act as a vacuum, extracting high-value manufacturing and demanding tribute for energy and security. On the Eastern Front, Berlin’s financial elite, symbolized by the Merz government, continues to double down on China.
In this context, the €85.7bn trade deficit is simply the cost of doing business in a way that guarantees a global return on investment. It is the cost of accessing the scale, supply chain density and market proximity that China offers and appeasing an increasingly extractive U.S.
European industry is not merely declining; it is being systematically dismantled. The financial elite can achieve higher returns by feeding the U.S. military-industrial complex and embedding itself within Chinese supply chains. The social cost—the hollowing out of the Mittelstand, the loss of skilled jobs—is just collateral damage. The “greenfield projects” in China and the U.S. are where the remains of the old German industrial model will be buried.
This is the end stage of the financialization of Germany, and by extension the wider-EU economy. The European project, once touted as a potential counterweight, has been reduced to a talking shop presiding over its own economic dismemberment. It is being reconfigured into a captive market for American goods and a talent pipeline for U.S. corporations, while its own once world beating companies ensure their financial survival by integrating themselves in the very ecosystem—China—that its politicians demonize.
The continent is not just being deindustrialized; it is being un-made; its economic sovereignty liquidated between the Washington and Beijing.