Amid the focus on Europe’s new defense projects, Germany’s own investment plans have received surprisingly little attention. By removing its budget deficit limit in March of this year, Germany opened the door for government spending that rivals some of history’s largest investment projects. It is set to far exceed the Marshall Plan to rebuild Europe after 1945 and come close to the spending for Germany’s reunification after 1990. It is also expected to surpass US government spending since 2020 (relative to their domestic GDP), which significantly boosted the American stock market over the past five years. Recent reports suggest that nearly 90% of Germany’s investments will flow directly to German companies—a move that could put Berlin at odds with the EU.
The debate around import tariffs often centers on their short-term impact on inflation. But the long-term impact receives far less attention. As the United States and Europe raise trade barriers against Chinese technology, their populations miss out on large cost advantages. Today, domestically-produced electric cars and -buses from the United States can cost up to three times more than their Chinese equivalents. Given the political unrest over the cost of living across the Western world, it is possible that public opinion will turn against these protectionist policies.
The Western image of China as merely the world’s factory for cheap goods has been dismantled step by step, but the final realization has yet to sink in. In 2020 the pandemic exposed China’s dominance in pharmaceutical ingredients, and in 2025 the West has discovered its control over rare earth metals. In the meantime, China became a global leader in producing high-end batteries and electric vehicles. Still, one shift remains underestimated: China’s ability to push the frontier of innovation. A clear example is biotechnology, where China has emerged as a world leader in developing new medicines — capturing 31% of the global market after starting from zero just a few years ago.
China’s export controls on rare earth metals are part of a broader strategy. Since 2024 the BRICS-countries (Brazil, Russia, India, China and South-Africa) have reportedly been working toward the launch of a new metals trading platform - covering everything from gold and silver to rare earths - that will operate independently of Western exchanges in Chicago and London, as well as Western payment systems like SWIFT. Together, the BRICS control roughly 84% of the world’s rare earth reserves. Much like the Arab OPEC countries during the 1973 oil crisis, the BRICS could use their dominance in critical resources to exert pressure on the United States and Europe.
