Germany thrived in the first China Shock. But the next one could prove catastrophic.

"The VDMA is an industry association (whose name is a German acronym that translates to Association of German Mechanical and Plant Engineering). It represents thousands of German companies that manufacture industrial machines and equipment. The companies are a big part of what Germans call the "Mittelstand," which are small and medium-sized manufacturers that are widely considered to be "the heart of the German economy.""

"Just the day before, Germany's chancellor, Friedrich Merz, had spoken there. Before he gave his speech, Merz listened as the president of the VDMA said their companies are "angry and disappointed" over the miserable state of the German manufacturing industry. "Pretty much every statistic that we have is going in the wrong direction right now," Richtberg told me when we met up at the conference. Exports are nose-diving. Job cuts and furloughs are mounting. In the past six months alone, production is down 4.5 percent."

"It's part of a multi-year slump. The VDMA is now ringing the alarm bells that something big needs to change. Germany is facing an economic crisis. Economic growth has sputtered for more than five years, and its world-famous manufacturing sector is in deep trouble. There are several causes of the crisis, including the higher price of energy in the wake of Russia's 2022 invasion of Ukraine and the effects of U.S. tariffs."

A representative of the VDMA described widespread declines in German manufacturing, noting exports are plunging and production fell 4.5 percent in six months. The VDMA represents thousands of industrial machine and equipment manufacturers that form the Mittelstand, often called the heart of the German economy, and holds a politically influential annual summit. Industry leaders reported companies are "angry and disappointed" as job cuts and furloughs mount. Economic growth has sputtered for more than five years. Contributing factors include higher energy prices after Russia's 2022 invasion of Ukraine and the effects of U.S. tariffs, while a larger shock appears to be emerging.

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