Global export competitiveness is rapidly evolving. This column presents a novel granular decomposition of export market share changes into demand and supply effects. Applied to Germany, it reveals steep supply‑side losses in medium-/high‑tech and energy‑intensive goods driving recent market share declines. Meanwhile, China continues to gain competitiveness in medium-/high‑tech exports, even as adverse demand pulls on overall shares. In contrast, the US and France have largely held steady in recent years, buoyed by favourable demand effects. The approach provides policymakers with a powerful analytical tool to trace where competitive shifts originate and identify the underlying supply or demand factors.
Gains or losses in a country’s international competitiveness can be systematically analysed by decomposing changes in its export market shares. We build on the seminal frameworks of Gaulier et al. (2013) and Cheptea et al. (2005), which separate market share shifts into supply-side and demand-side components. Our novel decomposition (Deutsche Bundesbank 2025) extends these contributions by further distinguishing aggregate supply-side competitiveness into distinct product-level and partner-level effects. 1 This enables us to identify whether competitiveness shifts are primarily driven by specific sectors, particular markets, or both.
Specifically, the decomposition distinguishes between four effects. Two demand-side effects indicate whether a country specialises in products (product demand effect) or trading partners (partner demand effect) where market growth has been especially strong or weak. Two supply-side effects capture how a country’s competitiveness has evolved within individual product groups (product supply effect) or specific export markets (partner supply effect). These supply-side effects capture the relative performance of particular sectors or the overall economy in certain markets, providing deeper insights into a country’s international competitive position.
Germany’s persistent export market share decline
Germany’s export market share has been steadily declining since 2017. While the country’s market share remained relatively stable up to 2016, it began to decline thereafter and deteriorated sharply from 2021 onwards. 2 To understand the drivers behind Germany’s declining export performance, we apply our novel decomposition approach to the BACI dataset of international trade flows provided by the French research institute CEPII, covering the period from 2000 to 2023 (latest available data). Our results indicate that Germany has experienced significant and persistent losses in export competitiveness. Approximately three-quarters of the reduction in market shares since 2017 – and an even larger proportion since 2021 – can be attributed to supply-side factors (Figure 1).
Figure 1 Decomposition of Germany’s export market share (year-on-year change)
A detailed analysis of the product supply effect reveals that German exporters suffered widespread competitiveness losses across a wide range of products. It also shows pronounced volatility in the 2021-2023 period, reflecting both persistent structural challenges and temporary shocks. Between 2017 and 2023, competitiveness declined in more than three-quarters of nearly 100 product categories classified at the HS two-digit level. This trend highlights underlying structural challenges in the German economy, affecting both price and non-price competitiveness. Contributing factors likely include labour shortages, relatively sharp increases in unit labour costs, increasing bureaucratic burdens, and heightened competitive pressures from China. Layered over these headwinds were pandemic-induced supply-chain disruptions and a sharp energy-price surge following Russia’s invasion of Ukraine. Given Germany’s particular exposure to both shocks, these events likely drove a significant portion of the marked downturn and the subsequent partial rebound in competitiveness between 2021 and 2023. Medium-high and high-tech goods, especially in the machinery and electrical industries, were hardest hit by input-related bottlenecks. Energy-intensive sectors, such as parts of the chemical and metal industries, bore the brunt of higher energy costs. Although some sectors began to recover in 2023, as supply chains normalised and energy prices moderated, these gains fell short of offsetting earlier losses.
Additionally, unfavourable product-demand effects significantly contributed to the decline in Germany’s export market share, as German exports were concentrated in products experiencing below-average global demand growth. This situation was primarily driven by weak international demand for motor vehicles and aerospace technology. 3
Export competitiveness across major economies
We extend the analysis to a set of major economies — France, the UK, the US, the euro area excluding Germany, and China — over the 2001-2023 period to provide context and perspective. The comparison reveals stark differences in export competitiveness trends across these countries (Figure 2).
Figure 2 Decomposition of export market shares of selected countries (mean year-on-year change)
Between 2001 and 2016, Germany largely maintained its export market shares and competitiveness. By contrast, other advanced economies such as the US, France, and the UK saw substantial declines in export market shares, coinciding with drops in manufacturing value added and the rise of intensified competition from China, i.e. the ‘China shock’ (Price et al. 2014, Baldwin 2024). Those losses were concentrated mainly in medium- and high-tech manufacturing goods, with chemical products also making sizeable negative contributions in France and the UK. Over the same period, China recorded considerable market share gains, driven primarily by improved competitiveness in medium- and high-tech industrial products and, to a lesser extent, by advances in light industry and consumer goods, metals, and chemical products.
Since 2017, Germany has lost its previously unique position in export market share developments. In other advanced economies – excluding the UK, where Brexit continues to weigh on competitiveness – aggregate supply-side pressures have eased, particularly since 2021 (Figure 3). Some weaknesses in medium- and high-tech goods persist in France and the US, but they have been partly offset by positive contributions from mineral products (including energy), to which price effects likely contributed. Since 2021, favourable partner-specific demand has helped France and the euro area (excluding Germany) stabilise their export market shares, while the US has achieved modest gains supported by both product- and partner-specific demand.
Figure 3 Decomposition of product supply effect of selected countries (mean year-on-year percentage point change)
China’s export market share development since 2017 has been mixed. It has continued to build product-specific supply-side strength, most notably in medium- and high-tech goods as well as in metals and chemical products, but these gains have been largely balanced by unfavourable product- and partner-specific demand effects. The slight decline in its market share over 2021-23 reflects these dampening demand pressures together with the unwinding of the temporary COVID-19–related export surge in 2020. Overall, China made almost no net gain in export market share between 2017 and 2023.
Conclusion
We introduce a novel approach to decomposing changes in export market shares into demand- and supply-side effects. Our method allows disaggregation at a highly granular level, showing how particular products and destination markets contribute to shifts in competitiveness. We illustrate its value by tracing the recent erosion of Germany’s export market shares, but the framework is fully general and can be applied to any country. With policymakers scrutinising China’s rise (Airaudo et al. 2025), the new Trump tariffs and trade diversion (Evenett and Martín 2025, Hinz et al. 2025), and evolving trade policies, our granular decomposition results and underlying dataset deliver timely, actionable insights and a clear methodological toolkit.
Source : VOXeu
