Europe is confronting a new wave of economic challenges from China that could significantly impact its local industries and employment landscape. Trade experts warn of the increasing risk of factory closures and job losses as Europe becomes more reliant on Chinese imports. This scenario echoes the “China shock” experienced by the United States 25 years ago, when China’s entry into the World Trade Organization led to a surge in imports that displaced local industries and resulted in the loss of millions of jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlighted the dependency on Chinese components, suggesting that Europe is increasingly reliant on imports from China, which now permeate deeply into the EU’s industrial sectors.
European policymakers are facing difficult decisions as they strategize on reducing this dependency. A recent Financial Times report suggested that the EU might require companies to source critical components from multiple suppliers. The urgency of the situation has prompted European commissioners to convene for discussions on May 29 to explore viable countermeasures. Oliver Richtberg from VDMA, representing Europe’s machinery and equipment manufacturing industry, praised the EU’s proactive approach but expressed concerns over Berlin’s engagement. He pointed out that China’s state subsidies, unfeasible in Europe, along with significant currency undervaluation, make Chinese products significantly cheaper, forcing European procurement to opt for these imports.
The growing reliance on Chinese imports is troubling, with sectors like amino acids and polyhydric alcohols showing an overwhelming dependency on Chinese supplies. Data indicates the EU imports 88% of its amino acids and 96% of polyhydric alcohols from China by volume. This raises alarm over the potential for EU industries to become uneconomical, leading to increased dependence on the very source that threatens their viability. Trade figures reveal China’s expanding trade surplus with the EU, with tariffs failing to counterbalance the exchange rate advantages that Chinese imports enjoy. Andrew Small from the European Council on Foreign Relations emphasizes that the existing EU measures are inadequate given the scale of imports from China.
Germany, now China’s top trading partner in Europe, has seen a sharp increase in its trade deficit with China, exacerbating the challenges faced by its industries. The country’s car manufacturing sector alone has suffered substantial job losses. Jens Eskelund warns that the situation could escalate beyond an economic issue to a security concern if the reliance on China continues unchecked. In response, the EU has proposed legislative measures like the Industrial Accelerator Act and updates to the Cyber Security Act, although these will not take effect until 2027 at the earliest, leaving immediate solutions elusive.
As the EU grapples with these issues, there is a growing realization that the political will to impose tariffs is waning, given the complexities and limited success of previous efforts. Andrew Small notes that while the EU’s measures are carefully calibrated to account for China’s likely resistance, the reality is that Beijing wields considerable influence in the ongoing trade dynamics. China’s strategy may not necessarily focus on halting EU countermeasures but rather on complicating processes to maintain its export flow, leaving European policymakers in a challenging position as they seek to protect their industries.