Europe is confronting a new wave of industrial challenges from China, sparking concerns among trade analysts about potential job losses and a shift in industrial control towards Beijing. The situation mirrors the “China shock” experienced in the United States 25 years ago, where China’s entry into the World Trade Organization led to an influx of imports that displaced local industries. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlighted the growing dependency on Chinese components rather than finished goods, which is deepening Europe’s reliance on China.
To address these issues, the European Union is weighing measures such as mandating companies to source critical components from at least three suppliers, as reported by the Financial Times. The European Commission is scheduled for discussions on May 29 to explore potential actions. Oliver Richtberg from VDMA, the European machinery and equipment manufacturing industry’s trade organization, praised the EU’s proactive approach compared to Germany’s. He pointed out the impact of China’s state subsidies and a currency undervaluation that has made Chinese products more competitive, contributing to significant job losses in Germany’s machinery sector.
Data from the Mercator Institute for China Studies highlights the extent of Europe’s dependency, with a significant portion of imports in sectors like amino acids and polyhydric alcohols originating from China. This dependency risks making EU production economically unviable, according to a trade consultant monitoring the situation. China’s trade surplus with the EU is expanding, and currency fluctuations have undermined the effectiveness of EU tariffs on Chinese electric vehicles, which were intended to address trade imbalances.
Germany has become increasingly reliant on China, now its top trading partner, with China’s surplus with Germany doubling from $12 billion to $25 billion between 2024 and 2025. This shift has resulted in the loss of 250,000 industrial jobs in Germany since 2019, with significant impacts on car manufacturing. Jens Eskelund expressed concern over the existential threat posed by this reliance, as a growing number of European companies expand their presence in China, raising concerns about deindustrialization and potential security implications for Germany.
The European Union has proposed two legislative measures aimed at protecting its industries, including the Industrial Accelerator Act and an update to the Cyber Security Act. However, these will not take effect until 2027, leaving the EU under pressure to find immediate solutions. Andrew Small from the European Council on Foreign Relations emphasized the need for a robust response to balance the trade relationship with China, noting that previous efforts like tariffs fell short. Meanwhile, China remains in a position to influence the EU’s countermeasures, potentially delaying their impact while maintaining its export flow.