Europe
Germany’s chemical industry crisis deepens amid US tariffs and Chinese imports
Following the automotive and steel industries, the chemical industry has been added to the crisis reports emerging from the German economy.
According to recent reports, production in the German chemical industry contracted by approximately 5% in the second quarter of 2025. Observers note that overall production is now as weak as it was in 1991.
The sector is under particular pressure not only due to cheap imports from China but also because the EU has reduced tariffs on imports from the US to zero under the current trade agreement with the Trump administration. Consequently, US chemical products can now successfully compete with German goods.
Additionally, the German chemical industry no longer receives low-cost Russian gas, which has eroded a significant foundation of its formerly strong, but now diminishing, competitive advantage.
Crisis reports are also coming from other sectors: overall, German industrial production fell by 5.6% in August compared to the previous month.
The decline in German industry continues
On Wednesday, new data from the Federal Statistical Office confirmed the bleak situation in German industry.
According to this data, production in the manufacturing sector fell by 4.3% in August compared to the previous month. In industry alone—excluding energy production and construction—the decline reached 5.6%.
Observers note that an unusual number of automotive companies scheduled their annual shutdowns for August this year, which artificially restricted production.
However, even excluding the automotive sector, production fell by approximately 2.5%; in the crucial machine engineering sector, there was a contraction of up to 6.2%.
Orders received in August also decreased by 0.8% compared to the previous month, marking the fourth consecutive month of declining orders.
The new US tariffs, which make all types of exports unprofitable, are seen as the primary reason for this. The sector’s weakness was a significant factor in the German government’s decision on Wednesday to lower its 2025 growth forecast to just 0.2%.
The Federal Republic’s economic performance had already declined by 0.3% in 2023 and 0.2% in 2024. Federal Minister for Economic Affairs Katherina Reiche commented, “Other economies are growing.”
Meeting after meeting from the CDU-SPD government
The German government is responding to the drop in production with crisis meetings. For example, an “automotive summit” was held yesterday at the Federal Chancellery to find solutions for the dramatic situation facing the automotive industry.
The sector has lost approximately 112,000 jobs since 2019, with about 51,500 of those losses occurring last year alone. Further layoffs are inevitable: Volkswagen will reduce its workforce by up to 35,000, and Daimler by about 5,000.
Suppliers are also making significant cuts: Bosch plans to lay off up to 13,000 people, and ZF up to 7,600.
One of the reasons for this is the transition to electric mobility, which German automotive companies have failed to organize effectively, leaving them far behind their Chinese competitors.
The Federal Chancellery also announced it will hold a crisis meeting with representatives of the steel industry in October. This industry also suffers from structural problems but is particularly affected by the US tariff war: steel exports to the US are subject to a 50% tariff instead of 15%.
Germany, whose steel producers recently manufactured about 37 million tons of crude steel annually—more than any other EU country—is severely affected by this situation.
Before the tariffs were implemented, Germany supplied approximately 1 million tons of steel to the US.
Weakness in the chemical sector resembles 1991
Meanwhile, the situation in the German chemical industry continues to worsen.
The industry was particularly harmed by the politically motivated decision to stop purchasing cheap Russian pipeline gas and switch to expensive liquefied gas.
By 2022, chemical production, excluding the pharmaceutical sector, was already about 10% below the previous year’s level. In 2023, it fell by another 11%.
Currently, a significant decrease in demand from other crisis-hit industries, such as the automotive sector, is causing orders to fall.
According to industry sources, plant capacity utilization is currently at 71%. The threshold for profitable production is 82% capacity utilization.
According to the German Chemical Industry Association (VCI), German chemical production in the second quarter of 2025 was 5% below the figure for the previous year.
Entire chemical plants are now being shut down: according to reports in the German media, six companies in the sector have announced plans to close their plants entirely this year alone.
So far, more than 2,000 jobs are said to have been cut. The sector is producing at its lowest level since 1991.
American tariffs hit German heavy industry
Further declines are on the horizon. On one hand, imports from China are increasing significantly: according to reports, they rose by about 40% in the first half of the year alone compared to the same period last year.
Chinese companies, including the Chinese subsidiaries of German chemical firms, can produce much more cheaply thanks to lower energy prices, for example.
In addition, new US tariffs are making it difficult for China to export to the US; therefore, Chinese companies are seeking new sales markets and are trying to penetrate the EU, among other places, even more intensively.
This comes at a time when German chemical companies are under additional pressure due to the EU’s trade agreement with the US. The reason is that the 6.5% tariffs on imports from the US, which previously applied to the sector, will be reduced to zero under the new agreement.
The market research group ICIS warns that while tariffs previously protected Europe’s chemical market to some extent from cheaper US products, their removal could now have enormous effects on trade flows.
According to reports, imports of chemical products from the US to the EU had already increased in the first half of 2025 and are expected to rise further.
Demand for protectionism against China
Meanwhile, calls are growing for the EU to take “targeted protectionist measures” for the German chemical industry, which is falling behind in global competition.
For example, the European industrial association Cefic is demanding a reduction in chemical imports from China.
This is also consistent with the measures announced by the European Commission on Tuesday to protect the EU steel industry. According to these measures, the amount of steel that can be imported into the EU duty-free will be nearly halved to 18 million tons.
At the same time, the tariff applied to steel imported above this amount will be increased from 25% to 50%. The reason for this is that US tariffs exclude steel not only from the EU but also from many other countries, which pushes steel producers in Turkey and China, for example, to seek new markets, thereby increasing export pressure on the EU.
According to the EU, stabilizing steel production in the EU is essential to secure the raw material supply for the European defense industry. However, according to EU diplomats, Brussels does not consider this sufficient.
The plan is to negotiate a “common tariff-free zone for steel products” with the US and then to have the UK join this zone.
The EU Commission thus aims to stabilize transatlantic trade while simultaneously blocking imports from China.
Europe
German officials urge fighter jet alliance with Sweden and Spain
German Defence Ministry officials have advised Berlin to form a new fighter jet partnership with Sweden and Spain rather than join an existing UK-led consortium.
Internal ministry assessment notes obtained by Politico state that a trilateral arrangement among Germany, Sweden, and Spain represents a “more advantageous and promising” approach than joining the Global Combat Air Programme (GCAP) run by the UK, Italy, and Japan.
The proposal outlined in the document does not yet represent a final government decision, nor does it contain any indication that German Defence Minister Boris Pistorius has approved the recommendation.
The advice was drafted after Germany’s flagship project with France to build a next-generation fighter jet collapsed in June following years of industrial infighting.
Initiated in 2017 and later joined by Spain, the Future Combat Air System (FCAS) was conceived as a showcase initiative for European defence cooperation. The partnership aimed to develop an aircraft to replace Germany’s Eurofighter fleet starting in 2040.
However, the initiative foundered on disputes over operational control and workshare between France-based Dassault and Germany-based Airbus Defence and Space. Following unsuccessful rescue attempts at the political level, Berlin withdrew from the joint fighter project this year.
UK Prime Minister Andy Burnham raised the prospect of Germany joining GCAP during an 8 October meeting in Berlin with Friedrich Merz. The two leaders agreed that officials should continue discussions.
For Berlin, the choice carries implications that reach far beyond which model its air force will fly. The decision will determine who controls future military technology, which countries secure production contracts, and whether a new European partnership can avoid the frictions that dismantled FCAS.
Ministry assessment keeps distance from UK-partnered GCAP project
The ministry assessment listed several reservations regarding the GCAP project. The report argued that the existing programme focuses on operations beyond Germany’s capability requirements, whereas Berlin needs an aircraft better suited for missions over continental Europe.
The document also noted that German manufacturers would struggle to secure a significant share of development and production work within an already established partnership.
Invoking past experiences with the Eurofighter programme, which was developed in the 1990s and entered service in the early 2000s, the document took direct aim at British defence contractor BAE Systems.
The German Defence Ministry assessment accused BAE Systems of prioritizing exports over the development interests of Germany and Italy, warning that British dominance would prove incompatible with an equal partnership.
By contrast, the document stated that the military requirements of Germany, Sweden, and Spain align closely and that their starting positions are well balanced.
The assessment proposed an industrial partnership between aerospace giant Airbus and Sweden’s Saab, while recommending that the Saab-manufactured Gripen E fighter jet serve as a technological stepping stone until the new aircraft is developed.
The German Defence Ministry declined to comment on the matter. A separate ministry note, however, recorded British efforts to integrate Germany into GCAP as an observer or participant, asking German officials to examine potential industrial roles and military requirements.
An Airbus spokesperson said the company was “generally open to cooperation”, provided that German and Spanish industry secured a “substantial and equal role” across development, production, and operational phases.
“Purely political decisions without an industrial foundation remain insufficient,” the spokesperson said, urging authorities in Berlin and Madrid to clarify the path forward swiftly.
In an interview published in Handelsblatt on Monday, Airbus defence chief Michael Schollhorn pointed to ties with Saab, noting that the two companies have always worked well together.
A Saab spokesperson also indicated that the company is receptive to broad defence cooperation, including in fighter aircraft.
Emphasizing that large-scale collaborative projects are handled at the political level and that participation decisions rest with the respective governments, the spokesperson said: “All questions regarding potential Swedish participation should be directed to the Swedish government. Saab stands ready, as always, to support Sweden’s future fighter aircraft requirements.”
Europe
EU reopens debate on naming envoy for Ukraine talks with Putin
The European Union has returned to the idea of appointing an envoy to hold talks on Ukraine with Russian President Vladimir Putin.
According to sources familiar with the matter who spoke to Politico, this search gained fresh momentum following a visit to Russia by Steve Witkoff, the US special envoy.
During his trip, Witkoff proposed to Putin that Russia, the US, and Ukraine hold trilateral talks.
European countries, meanwhile, fear that Washington could accept terms unfavourable to Kyiv in negotiations that exclude them.
Sources speaking to Politico said the names being discussed for the envoy role include European Commission President Ursula von der Leyen, European Council President António Costa, and EU High Representative for Foreign Affairs and Security Policy Kaja Kallas.
Some European diplomats believe Finnish President Alexander Stubb may be the most suitable candidate for the post.
Stubb’s good relations with Trump and Finland’s experience in dealing with Russia are cited among the factors setting him apart.
An unnamed EU diplomat described Stubb as the only European politician so far to have demonstrated senior-level leadership.
Another group of diplomats argues that Costa should lead the talks. European leaders asked Costa during last week’s EU summit in Brussels whether the time had come to speak with Putin.
Politico’s source recounted that exchange: “Costa said no, saying he would not speak to Putin right now. But if we want to play a role in the negotiations, Costa still needs to initiate dialogue with Putin.”
According to an assessment by another source, the European Council president could serve as a more neutral mediator than von der Leyen or Kallas, who are seen as overly focused on supporting Ukraine.
“Three or four people cannot go there with each of us speaking on behalf of the European Union,” one of the sources told the publication. “Ultimately, the choice of who represents the EU must be based on maximum efficiency, not on a personal power struggle or someone’s narcissistic ambitions.”
Politico previously reported in January that the EU was considering appointing a special representative for Ukraine negotiations. At the time, the initiative drew support from several European leaders, including French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni.
Putin said he was ready to negotiate with European countries, but asserted that Europe had “no peace agenda” and stood “on the side of war”.
The Russian leader also named former German chancellor Gerhard Schröder as Moscow’s preferred negotiator from Europe.
Kallas ruled out such an appointment, noting that Schröder was “a lobbyist for Russian state companies” and would sit “on both sides of the negotiating table”.
Stubb details obstacles to talks and Oslo diplomatic drive
Finnish President Alexander Stubb said the principal obstacle to ending the war between Russia and Ukraine was the territorial issue.
Stubb took part in talks in Oslo with US envoy Steve Witkoff, who subsequently travelled to Saint Petersburg to meet Vladimir Putin.
As reported by the newspaper Helsingin Sanomat, Stubb stated that advancing the peace process required either bilateral talks between Russia and Ukraine or trilateral negotiations involving the US.
The Finnish president listed the other major items to be addressed within a settlement as US security guarantees for Ukraine and the construction of a new European security architecture after the war ends.
Without stating it outright, Stubb implied that the core issue within this framework was Ukraine’s NATO membership. The Finnish leader pointed to monitoring the ceasefire, establishing the line of contact, ensuring energy and food security, and exchanging prisoners as practical tasks.
Stubb also detailed the talks held in Oslo on 20 October, which included Witkoff, Ukrainian President Volodymyr Zelenskyy, and Norwegian Prime Minister Jonas Gahr Støre.
The discussions, which spanned approximately eight hours across various formats, had three objectives: to lower tensions in public discourse, to convey European and Ukrainian proposals to the US envoy before his visit to Russia, and to determine the next steps toward a peaceful settlement. Stubb announced that these goals had been achieved.
Moscow ready to resume trilateral talks in November
Witkoff met Putin in Saint Petersburg on Wednesday.
Following the meeting, Russian presidential aide Yuriy Ushakov announced that Moscow was prepared to resume trilateral negotiations with the US and Ukraine during the first half of November.
Ushakov also said that the EU and NATO had begun to “take a more serious approach” to Kremlin proposals on Ukraine, adding that “matters” were moving toward an end to the conflict.
Witkoff described the meeting as “constructive”.
Sources told Bloomberg in September that Putin continued to insist the Donetsk region must come fully under Russian control, expressing confidence that the territory would be captured within the next six months.
Putin previously set conditions for ending the war, demanding that Ukraine abandon plans to join NATO, maintain a neutral and non-nuclear status, and that anti-Russian sanctions be lifted.
Europe
Trump midterms calculus halts Israeli strike plan against Iran
A comprehensive military operation planned by the Israeli military for 10 October did not take place because US President Donald Trump chose to avoid a broad conflict before the 3 November congressional midterm elections.
Preparations had been made on the orders of Prime Minister Benjamin Netanyahu for an aerial bombardment meant to last several days, according to a report by the Financial Times citing sources familiar with the matter.
The list of targets included nuclear facilities and locations associated with the Iranian leadership, along with power stations and other civilian infrastructure sites.
The planned strikes were projected to exceed the joint operation launched by the US and Israel in February in terms of intensity.
White House Deputy Press Secretary Anna Kelly told the newspaper: “The United States is not going to strike Iran at any point before the midterms.”
Kelly argued that the administration in Tehran was in distress both economically and militarily, adding that the blockade imposed on Iranian ports and US efforts to secure oil shipments through the Strait of Hormuz were producing results.
Speaking to the newspaper, one source addressed the possibility of strikes resuming in the coming weeks, saying: “There’s either going to be a deal or a strike.”
The same source reported that Washington aims for a comprehensive settlement that resolves the conflict over both the Strait of Hormuz and the nuclear programme, although it remained unclear whether the US would have participated directly in the cancelled operation.
Another source said the preparations for the operation might have served as leverage to pressure Tehran in negotiations, adding that the final decision on any new military step rests with the US president.
Hegseth reviews updated target list in Israel
An Israeli official said US Secretary of War Pete Hegseth visited Israel on 19 October to meet with Netanyahu and senior representatives.
Another source stated that the Israeli side presented an updated target list to its American counterparts, compiled with fresh intelligence and incorporating civilian infrastructure sites that had not been struck earlier this year.
The Pentagon did not respond to questions regarding the meetings, while Netanyahu’s office and the Israeli military declined to comment.
Despite the postponement of the operation, Trump and Netanyahu continued to issue military warnings to Iran in public.
In a video released on 19 October, Netanyahu addressed Trump, saying: “Donald, you said we need to finish this, and we will finish it together.” Speaking on speakerphone, Trump responded: “You’re a great warrior, and we’re going to prove it very soon.”
These engagements between the leaders coincide with critical election cycles in both countries.
Parliamentary elections in Israel are scheduled for 27 October, one week before the vote in the US.
Most public opinion polls in the country show the opposition bloc holding a narrow lead over Netanyahu’s coalition, though neither side commands a clear majority.
Axios, a US-based news outlet, previously reported that the Pentagon instructed military planners to finalize strike plans against Iran, though the directive specified no date and Trump had not reached a final decision.
On 15 October, CNN reported on plans to use the GBU-43/B munition, known as the “mother of all bombs”, against Iranian nuclear facilities, with US officials who spoke to the broadcaster expressing scepticism about the weapon’s ability to destroy deep bunkers.
While Tehran announced that it remains open to a diplomatic solution, it declared that any potential operation would draw a fierce response.
Iranian Foreign Minister Abbas Araghchi stressed that if its adversaries chose military conflict, the response would be “much harsher than before”.
Following the joint operation launched by the US and Israel on 28 February, Iran retaliated by striking targets across the region and restricting maritime passage through the Strait of Hormuz.
Although the parties reached an agreement in June covering a ceasefire and negotiations to lift the blockade in the strait, reciprocal strikes between the US and Iran have not ceased.
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