Europe is grappling with a renewed “China shock,” a development reminiscent of the economic jolt experienced by the United States 25 years ago. Trade experts are sounding the alarm over escalating imports from China, which they argue threaten to undermine local manufacturing and lead to job losses. This phenomenon, marked by China’s aggressive entry into global trade following its World Trade Organization membership, previously resulted in significant job displacement in the U.S., and now presents similar risks for European industries. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlights the less visible but critical issue of component imports from China, emphasizing Europe’s growing dependency on these imports.
The European Union faces difficult decisions as Chinese components increasingly become integral to its industrial landscape. A recent report suggests the EU may require European companies to diversify their suppliers for critical components to mitigate this dependency. European commissioners are scheduled to meet on May 29 to discuss potential strategies. Oliver Richtberg, leading foreign trade at VDMA, acknowledges the EU’s proactive stance, although he criticizes Berlin for its lack of engagement. The undervaluation of the yuan, potentially by 40% against the euro, exacerbates the challenge, as procurement managers find it economically rational to favor cheaper Chinese products over European ones.
The impact on Europe’s industrial sector is stark, with Germany alone losing 22,000 machinery industry jobs last year. The situation is further complicated by China’s substantial share of the EU’s imports in various sectors. For instance, China supplies 52% of the EU’s amino acid imports by value, rising to 88% by volume. Polyhydric alcohols, crucial in multiple industries, see 96% of EU imports coming from China. This trend not only threatens economic balance but also raises concerns about long-term dependency and industrial viability within the EU.
China has emerged as Germany’s top trading partner, with a trade surplus doubling between 2024 and 2025. This has coincided with significant job losses in Germany’s industrial sector, particularly in car manufacturing. Jens Eskelund warns of the existential threat posed by Europe’s increasing reliance on China, noting a trend of European businesses expanding operations within China. This deindustrialization trend in Germany, where monthly job losses range from 10,000 to 15,000, could evolve from an economic to a security issue.
In response, the EU has proposed legislative measures, including the Industrial Accelerator Act and an update to the Cyber Security Act of 2019, aimed at protecting its industries. However, these initiatives will not be implemented until 2027, leaving immediate challenges unaddressed. Andrew Small from the European Council on Foreign Relations highlights the inadequacy of current measures like tariffs, pointing out the political difficulties involved in reintroducing them. As the EU navigates its response, China remains a powerful player, capable of complicating the EU’s efforts to balance trade dynamics.