Internationalism No. 89, July 2026 Page 3 From the series European news German industrial output has been falling for six years. This is happening at a time when the US is imposing tariffs, competition from China is growing, and the energy shock caused by the war in Iran comes on top of the severing of energy ties with Russia triggered by the conflict in Ukraine. Friedrich Merz's government is attempting to revive the economy through substantial defence spending and investment in infrastructure, combined with domestic reforms. However, the latter is precisely what the government is struggling with, and there is still no sign of the renewed momentum it had hoped for. As frustration grows across the country, the government's decline in the polls has been mirrored by the rise of the AfD. This is the context in which the debate over “China shock 2.0” is unfolding. T...