Europe is confronting a new economic challenge from China that threatens its local manufacturing sector and may lead to significant job losses and increased dependency on Beijing. Trade experts are drawing parallels to the “China shock” experienced by the United States about 25 years ago, when China’s entry into the World Trade Organization resulted in a surge of imports that displaced local industries and cost millions of jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, emphasized the increasing dependence on Chinese components, which are increasingly integrated into European industry.
As the European Union grapples with this issue, it faces critical decisions regarding its industrial strategy. A recent Financial Times report highlighted potential measures, such as requiring European companies to source critical components from at least three different suppliers. On May 29, European commissioners are scheduled to hold urgent discussions on possible actions. Oliver Richtberg of VDMA, representing the machinery and equipment manufacturing industry, praised Brussels for its proactive approach, contrasting it with Berlin’s. Richtberg pointed to aggressive state subsidies in China and currency fluctuations that make Chinese products more competitively priced, posing a severe threat to European manufacturers.
The economic impact is stark: Germany, now China’s top trading partner, has faced a significant trade imbalance, with China’s surplus doubling from $12 billion to $25 billion between 2024 and 2025. This shift has contributed to the loss of approximately 250,000 industrial jobs in Germany since 2019, with the automotive sector particularly hard hit, shedding around 51,000 jobs in just one year. Eskelund voiced concerns about the growing reliance on China, warning of potential deindustrialization and its broader implications for Germany’s economic and national security.
The EU is exploring legislative responses, such as the proposed Industrial Accelerator Act and updates to the Cyber Security Act, aimed at protecting its industries. However, these measures are not expected to take effect until 2027, leaving European industries vulnerable in the short term. Andrew Small of the European Council on Foreign Relations noted that while tariffs have been implemented, they fall short of addressing the trade imbalance, and political appetite for more tariffs is limited. The EU’s strategy must balance its actions against potential pushback from China, which remains a dominant player in the trade relationship.