Martin, the Olympic silver medallist in London behind Bradley Wiggins, completed the 45.7km route in a time of 58 minutes 38.76 seconds to claim Germany's second time-trial success in Limburg after Judith Arndt won the elite women's event on Tuesday.
Phinney was more than five seconds behind the German in 58-44.13, with the bronze medal going to Vasil Kiryienka, of Belarus, in 1:00:23.75.
Alex Dowsett, Great Britain's sole representative in the absence of Wiggins and Chris Froome, was eighth in 1:01:04.82, and Spain's Alberto Contador ninth.
Phinney was four seconds faster than Martin at the first time check, but the German moved 13seconds ahead at the second.
At the 38.4km time-check, Martin held an eight second advantage over the American, meaning that the ascent of the Cauberg would determine who would emerge victorious.