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

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BERLIN — On a cloudy day in mid-September, I biked across Germany's capital to meet up with Oliver Richtberg, a representative of the VDMA, at his organization's annual political conference. 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."

The VDMA has real political clout, and their annual conference, "the German Mechanical Engineering Summit," has become a must-go-to event for German leaders. 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.

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"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.

But there's an even bigger shock beginning to hit the German economy, and it's one that may be familiar to Americans who lived through the early 2000s. Only this time, the threat Europe's largest economy faces is even scarier than anything the United States faced back then.

Economists are calling this threat "the second China Shock." The first China Shock happened in the early 2000s. That's when exports from China began surging and manufacturers around the world found themselves unable to compete. In America, this first China Shock led to over a million manufacturing workers losing their jobs and many industrial towns falling into doomspirals.