German Companies Are Deeply Entangled With Both the US and China, Study Says

A study of corporate dependence points to a strategic bind

Germany’s biggest companies are deeply entangled with rival business ecosystems in both the United States and China, according to research cited by Phys.org from the University of Sussex and the University of Greenwich. The core conclusion is stark: Germany’s corporate sector is unable to cleanly escape either superpower.

That finding lands in the middle of a larger geopolitical argument about economic de-risking. Governments across Europe have tried to reduce vulnerabilities tied to concentrated supply chains, technology dependencies, and foreign market exposure. But the new research suggests that for major German firms, the practical reality is not simple diversification. It is simultaneous dependence.

Why Germany matters in this debate

Germany occupies a special place in Europe’s industrial structure. Its economy is built around globally active manufacturers, exporters, engineering groups, and large corporate networks that depend on open trade and deep international integration. When research says these firms are deeply entangled with both the US and China, it is not describing a marginal issue. It is describing a structural feature of Europe’s largest economy.

The importance of that point is political as much as commercial. Germany has had to navigate growing tensions between Washington and Beijing while protecting its own industrial base. The US remains a central security and economic partner. China remains an enormous market and a critical node in global manufacturing and supply chains. For many firms, choosing one side is not a viable operational plan.

Entanglement is different from simple exposure

The Phys.org summary does more than say German companies do business with both countries. It says they are deeply entangled and unable to escape either superpower. That language suggests more than export dependence. It implies embedded corporate relationships, supply links, investment ties, strategic partnerships, and market commitments that are difficult to unwind without major cost.

In practice, that means risk management has limits. A company may want to reduce vulnerability to one country’s policy shocks, tariffs, or export controls, but still find that core parts of its business model are tied to that same country. Exposure can sometimes be reduced around the edges. Entanglement is harder because it runs through the center of the organization.

The de-risking challenge

European policy debate has increasingly preferred the term “de-risking” over “decoupling.” The idea is to reduce strategic vulnerabilities without trying to sever all economic ties. The new research effectively tests whether that idea is realistic for Germany’s largest corporations.

The answer appears mixed at best. If the firms are unable to escape either the US or China, then even a moderate de-risking agenda faces practical constraints. Companies may diversify suppliers, relocate some production, or adjust investment priorities, but they cannot simply remove either superpower from their commercial environment.

That leaves executives and policymakers in a difficult position. They must plan for tension without assuming separation is possible.

Why the US-China rivalry creates pressure from both sides

The corporate bind is partly a result of how different the two relationships are. The US often represents capital access, technology ties, political alignment, and a critical advanced-market destination. China often represents manufacturing depth, scale, and one of the most important demand centers for industrial goods. For a company with global ambitions, those are not interchangeable functions.

As a result, pressure from one side can intensify dependence on the other rather than resolve it. Restricting Chinese exposure may raise costs or weaken market position. Reducing US ties may undermine financial, technological, or strategic standing. Germany’s largest firms are therefore not standing between two optional markets. They are operating across two systems that each support different parts of the business.

Implications for industrial strategy

The study also raises questions about how governments should think about industrial sovereignty. If large firms are this entangled, then calls for national or regional autonomy need to account for the complexity of existing corporate reality. New policies may encourage domestic production, allied sourcing, or more resilient supply chains, but they start from a deeply interconnected baseline.

For Germany, that could mean a more selective strategy rather than a sweeping one. Certain technologies, critical materials, or security-sensitive sectors may be prioritized for diversification. But broad disentanglement from either the US or China looks far less plausible if the research is correct.

That has implications for the European Union as well. Germany’s corporate structure is tightly linked to broader European manufacturing networks. Constraints on German firms do not stay inside Germany.

A warning against simplistic narratives

The study’s value is that it challenges easy rhetoric. Public debate often assumes companies can reposition rapidly when geopolitical incentives shift. The research instead suggests that the largest firms are already locked into overlapping networks that cannot be easily redesigned by political preference alone.

That does not mean change is impossible. It does mean change is likely to be slow, partial, and expensive. Companies may continue to rebalance portfolios and governments may keep pressing for resilience. But the expectation of a clean break from either Washington or Beijing is not supported by the picture described here.

The broader lesson is that globalization has left behind a form of corporate interdependence that persists even as the political climate hardens. Germany’s largest firms are not merely trading with both superpowers. They are embedded in both. That makes the current era less about choosing sides than about managing permanent strategic tension.

This article is based on reporting by Phys.org. Read the original article.