Retraining is often hailed as key policy tool for aiding displaced workers and smoothing the impact of sectoral shocks. We study the interaction of retraining and international trade in Germany, a highly open economy with extensive government-subsidized retraining programs. Using rich administrative data we provide evidence that workers routinely retrain in response to import competition and that the labour market effects of import competition are more muted for workers who do retrain. We introduce retraining into a model of workers from heterogeneous occupations who sort across sectors within a Ricardian trade framework. In our model, whenever retraining serves to broaden worker skills, it shrinks occupations’ trade exposure and compresses the distribution of trade-induced welfare effects. Calibrated to match our empirical results, the model reveals that retraining has little effect on Germany’s aggregate gains from rising imports from China and Eastern Europe but, in line with its skill-broadening function, reduces inequality among workers in the effects of import competition.