Europe is grappling with a renewed “China shock,” a development that threatens to undermine local manufacturing and lead to significant job losses, according to trade analysts and industry representatives. The declining exchange rate and the support for Chinese firms have drawn parallels to the crisis faced by the U.S. 25 years ago, when China joined the World Trade Organization and its imports began to displace local industries. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlighted that the real concern isn’t just finished goods like electric vehicles, but rather the vast influx of components from China, which is increasing Europe’s dependency on Chinese imports.
Amidst this growing reliance on Chinese components, the European Union faces critical decisions. Reports indicate that the EU is contemplating measures to mandate European companies to source critical components from at least three different suppliers. This comes ahead of urgent discussions among European commissioners slated for May 29. Oliver Richtberg, of VDMA—a trade organization for Europe’s machinery sector—praised Brussels for its proactive approach, contrasting it with Berlin’s less engaged stance. He pointed out that while state subsidies make Chinese products cheaper, the more pressing issue is the yuan’s undervaluation against the euro, which has made Chinese imports an attractive option for procurement officers.
The impact of these dynamics is evident, with Germany alone losing 22,000 jobs in its machinery industry last year. The trade analysis site Soapbox, in collaboration with the Mercator Institute for China Studies, has highlighted the alarming dependency on Chinese imports. For instance, 88% of amino acids by volume and 96% of polyhydric alcohols imported by the EU come from China. The data suggests that low-cost Chinese supplies are making EU production increasingly unsustainable, which could lead to long-term dependency on Chinese sources.
China has now surpassed the U.S. as Germany’s top trading partner, with China’s trade surplus with Germany doubling to $25 billion between 2024 and 2025. This shift in trade dynamics has contributed to the loss of approximately 250,000 industrial jobs in Germany since 2019, with the automotive sector being the hardest hit. Andrew Small, director of the Asia program at the European Council on Foreign Relations, emphasized that the measures currently employed by the EU are insufficient to address the scale of imports from China.
In response, the EU is working on legislative solutions such as the Industrial Accelerator Act and an update to the Cyber Security Act to bolster its industries. However, these will not take effect until 2027, leaving the EU in need of immediate strategies to support its industries. While the EU treads carefully to avoid provoking China, Beijing remains influential in trade negotiations. Small noted that China’s strategy may involve delaying EU countermeasures to maintain its export flow, underscoring the complex geopolitical landscape Europe must navigate.