Germany's 2025 Export Decline: Impact on DAX Valuation and European Stocks

1. Dual weakness in exports to the US and China drives external demand down.
   The latest trade data shows that in the first ten months of 2025, Germany’s exports to the US fell by 7.8% year-on-year, and exports to China still declined by 5.8%, with an overall export growth rate of only 0.7%. Among them, machinery, automobiles, and chemical products are the hardest-hit categories [1]. Export contraction has pushed Germany-China’s long-term trade surplus to a deficit of nearly 90 billion euros in 2025. This “dual imbalance of key markets” continues to pressure Germany’s manufacturing orders [2].
2. Economic expectations and monetary policy environment under pressure.
   Affected by weak external demand, institutions such as Germany’s ifo have lowered their 2024 GDP forecast, while social consumption confidence and corporate investment willingness are still recovering. The cyclical downturn in exports, combined with high tariffs imposed by the US, has kept manufacturing profit margins compressed compared to pre-pandemic levels [1][2].
3. European stock market valuations are overall under pressure but still differentiated.
   The DAX and STOXX 50 have risen by 45.5% and 28.0% respectively since the beginning of 2024, but this round of gains is mainly driven by the low base effect and some tech/growth stocks; it reflects that under export uncertainty, valuation expansion is limited, and core profitability has become the key to pricing [0].

1. Valuation center shifts downward:
   The current DAX level is 24,595, which is still higher than the 20/50/200-day moving averages (24,089, 23,957, and 23,626 respectively), indicating that the market is still bullish in the short term; however, the long-term upward trend is mainly driven by global liquidity and relatively stable European economic policies, which have not fully reflected the weak export momentum [0].
2. Earnings expectation adjustments suppress P/E:
   Taking Siemens as a representative, its price-to-earnings ratio of 19.45 times is still in a reasonable range, but it has fallen compared to the high of over 20 times in 2019-2021, reflecting that the market has already discounted the pressure from exports; BMW and Volkswagen’s P/E ratios are only 8.12 and 7.36 respectively, indicating that earnings expectations have been significantly compressed [0]. Although low valuations provide a defensive buffer, if exports remain sluggish, profit recovery will continue to drag down overall valuations, making the index difficult to escape the state of “low return and high volatility”.
3. Risk premium and relative returns:
   Among core European large-cap stocks, consumer/ pharmaceutical sectors with higher domestic demand are currently more resilient, while the DAX, which has a high weight of export-dependent industries and automobiles, is more likely to encounter earnings downgrades and valuation discounts. Investors need to pay attention to structural divergence and avoid the conceptual premium of “German manufacturing”.

1. Automobile giants (BMW, Volkswagen)
   • Both companies rely heavily on exports of machinery and automobiles to the US and Chinese markets. Weak exports have led to a double decline in orders and capacity utilization, which is reflected in Volkswagen’s continued negative free cash flow and compressed net profit margin—free cash flow was still -10.29 billion euros in 2024; BMW was also -4.64 billion euros, and the cash flow situation has squeezed debt service and EV/autonomous driving investments [0].
   • Low valuations (P/E 8.12/7.36) are accompanied by low growth expectations, making the market cautious about their next-phase profit recovery; if export demand does not reverse significantly in 2025, the profit squeeze between car sales prices and high R&D investment will continue.
2. Industrial/mechanical equipment representative (Siemens)
   • Although Siemens’ revenue comes from global diversified industrial, energy, and medical businesses, its industrial automation and mechanical systems are still sensitive to export signals. The current P/E ratio of 19.45 times and net profit margin of 12.19% reflect valuations based on a “high operating leverage + service business” combination; if overseas capital expenditures (especially in the US and Southeast Asia) slow down due to geopolitical and tariff factors, the earnings outlook will fluctuate rapidly.
   • Siemens still has cash flow and profit margin advantages (ROE 16%), which can partially resist external demand decline, so it has defensive attributes in the market—but profit recovery needs to rely on policy-driven infrastructure and new energy orders in Europe and the US, rather than a single export rebound [0].

1. Risk preference tilts toward domestic demand sectors:
   Against the background of export uncertainty, Eurozone funds are gradually favoring consumer and defensive industries, widening the valuation gap of STOXX 50, and forcing the export-oriented DAX to discount its valuation.
2. Limited fiscal and monetary policy space:
   Although Germany has fiscal room, it needs to coordinate the European Central Bank’s interest rate path and inflation targets, so short-term policy stimulus is limited, and export recovery takes time, which limits the optimization space at the valuation level.
3. Valuation gap still provides dip-buying opportunities:
   If low-valuation (7-10 times P/E) export leaders with stable cash flow can adjust their supply chains and strengthen service businesses, they can release alpha in the “low valuation + low growth” environment; but close attention needs to be paid to export orders, USD/CNY exchange rates, and the evolution of trade agreements.

1. Signals of export order recovery and core customer (US/China) demand recovery:
   Including US capital expenditure data, EV/mechanical equipment purchases, and China’s infrastructure/manufacturing investment data.
2. Pace of earnings forecast downgrades:
   Focus on the next-quarter earnings guidance of DAX heavyweights (BMW, VW, Siemens) to determine whether further downgrades will pressure valuations.
3. Valuation reconstruction opportunities:
   If Eurozone domestic demand support and service transformation accelerate, earnings expectations for export enterprises can be gradually raised, and the valuation gap between DAX and STOXX may have a “pre-export recovery repair” opportunity.
4. It is recommended to enable the deep research mode
   to obtain more detailed enterprise order structures, industry segment order data, and expert models, and dynamically monitor the profit elasticity and valuation re-rating path.

[0] Jinling API Data
[1] Germany Exports - Trading Economics (https://tradingeconomics.com/germany/exports)
[2] Germany’s 2025 Export Crisis: US Tariffs and China Deficit Weigh on Economy (https://www.globaltrademag.com/germanys-2025-export-crisis-us-tariffs-and-china-deficit-weigh-on-economy/)