Europe is grappling with a renewed “China shock” that threatens to erode its industrial base, leading to significant job losses and increased dependency on Chinese manufacturing. Trade experts warn that the influx of Chinese components is reminiscent of the situation in the U.S. 25 years ago, when China’s entry into the World Trade Organization resulted in massive import surges and the loss of up to 2.5 million American jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, emphasized that the real issue lies not in finished goods like electric vehicles, but in the overwhelming volume of components being imported from China, which is deepening Europe’s reliance on the country.
As the EU faces the challenge of dwindling local production, urgent discussions are planned among European commissioners to address the situation. The European bloc is considering mandating that companies procure critical components from at least three different suppliers to mitigate risk. Meanwhile, Oliver Richtberg from VDMA, representing Europe’s machinery and equipment manufacturing, praises Brussels for its proactive approach but criticizes Berlin for lagging in response. He attributes the competitive pricing of Chinese products to state subsidies and favorable exchange rates, which have made the yuan significantly undervalued against the euro, thereby pressuring European procurement decisions.
Richtberg highlights the impact of these economic dynamics on Germany, noting the loss of 22,000 jobs in the machinery sector last year alone. A China trade monitor has corroborated these concerns, revealing alarming data on the EU’s dependence on Chinese imports. For instance, while 52% of amino acid ingredients are imported from China by value, the figure skyrockets to 88% by volume. The reliance is even more pronounced for polyhydric alcohols, with 96% of EU imports coming from China. The risk, according to trade analysts, is that low-cost Chinese inputs could render EU production unviable, increasing Europe’s dependency on China.
China’s trade surplus with the EU is expanding, with Germany witnessing a doubling of its own trade deficit with China between 2024 and 2025. This economic shift is accompanied by significant job losses, particularly in Germany’s car manufacturing sector, which saw a reduction of 51,000 jobs within a year. Eskelund warns that the growing reliance on Chinese imports poses an existential threat to European industry, with Germany losing up to 15,000 jobs monthly. The EU’s legislative efforts, including the Industrial Accelerator Act and updates to the Cyber Security Act, aim to safeguard industry but will not take effect until 2027, leaving Brussels scrambling for immediate solutions.
Andrew Small from the European Council on Foreign Relations underscores the inadequacy of existing measures in addressing the trade imbalance with China. The EU’s attempts to impose tariffs have fallen short, and member states remain divided on further action. As the EU formulates its response, China holds a strategic advantage, capable of delaying countermeasures while maintaining its export flow to Europe. The challenge for Europe is to navigate this complex trade relationship without exacerbating tensions with Beijing.