Europe is confronting a renewed challenge from China, a situation trade analysts and industry representatives warn could lead to the hollowing out of local factories and substantial job losses. This renewed “China shock” is reminiscent of the disruption experienced by the United States 25 years ago, following China’s entry into the World Trade Organization. The influx of Chinese imports back then severely impacted local industries, leading to the loss of millions of jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlighted the increasing dependency on Chinese components, which are becoming more integral to the EU’s industrial processes.
The European Union is evaluating strategies to mitigate this dependency, including a proposal to mandate European companies to source critical components from at least three different suppliers. This comes amid concerns over the undervaluation of the yuan, which, according to German economist Jürgen Matthes, could be up to 40% against the euro. This currency imbalance, coupled with state subsidies that make Chinese products cheaper, poses a significant challenge to European manufacturers, as noted by Oliver Richtberg, head of foreign trade at VDMA. The European Commission is slated to discuss potential measures on May 29, while Richtberg praised Brussels for its proactive stance, though he critiqued Berlin for its lack of engagement.
Data from Soapbox, a China trade analysis platform, underscores the growing threat of industrial cannibalisation. For instance, the EU imports 52% of its amino acid ingredients from China by value, but this figure jumps to 88% by volume. The situation is even more stark with polyhydric alcohols, where 96% of imports come from China. This growing reliance poses a risk of making EU production economically unviable in the long run, according to a trade consultant behind the platform. Andrew Small, director of the Asia program at the European Council on Foreign Relations, observes that the EU’s current countermeasures are inadequate to address the scale of Chinese imports.
Germany, now China’s largest trading partner in Europe, has experienced significant job losses, particularly in the industrial sector. The country’s trade deficit with China has doubled from $12 billion to $25 billion between 2024 and 2025, with imports reaching $118 billion as exports fell to $93 billion. This trend has resulted in the loss of approximately 250,000 industrial jobs since 2019, notably in car manufacturing. Jens Eskelund expressed existential concerns over this dependency, warning that continued deindustrialization could evolve from an economic issue into a security concern for Germany.
The EU has proposed legislative measures, including the Industrial Accelerator Act and an updated Cyber Security Act, to safeguard its industries. However, these initiatives will not take effect until 2027, leaving immediate challenges unaddressed. As the EU grapples with this complex issue, Andrew Small emphasizes the need for member states to actively participate in finding solutions, noting that previous efforts to impose tariffs fell short of rectifying trade imbalances. Meanwhile, China remains influential in the ongoing trade dynamics, with the ability to disrupt EU countermeasures and maintain its export flow.