Europe is bracing for a renewed wave of economic challenges stemming from its increasing reliance on Chinese imports, a situation some trade experts compare to the “China shock” the United States experienced 25 years ago. This term originally described the disruptive impact on American industries following China’s entry into the World Trade Organization, which led to a surge in imports and the loss of millions of jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlights that the issue is not limited to finished goods like electric vehicles but extends to a significant influx of Chinese components, heightening Europe’s dependency on China.
As Chinese components become more integral to European manufacturing, the European Union faces difficult decisions. Reports suggest that the EU is contemplating a requirement for companies to source critical components from at least three different suppliers to mitigate this dependency. The concern is compounded by state subsidies in China, which make Chinese products more affordable, and a yuan undervaluation against the euro, estimated at 40%, according to German economist Jürgen Matthes. Oliver Richtberg of the VDMA trade organization notes that this pricing dynamic forces European procurement managers to opt for cheaper Chinese alternatives, putting local industries under pressure and resulting in significant job losses, such as the 22,000 positions lost in Germany’s machinery sector last year.
The situation is particularly dire in sectors reliant on ingredients like amino acids and polyhydric alcohols, where EU imports from China account for 88% and 96% by volume, respectively. This heavy dependence risks rendering EU production uneconomical, leaving the bloc vulnerable to disruptions from the very source it relies on. The trade imbalance is evident as China’s trade surplus with the EU continues to expand, with the 2024 tariffs on Chinese electric vehicles having little impact due to exchange rate fluctuations. Andrew Small from the European Council on Foreign Relations argues that the EU’s current measures are inadequate against the scale of imports.
China has overtaken the United States as Germany’s top trading partner, with imports from China reaching $118 billion, while exports to China have fallen to $93 billion. Since 2019, Germany has seen the loss of approximately 250,000 industrial jobs, notably in car manufacturing. Eskelund warns that this trend is not just an economic concern but could evolve into a security issue for Germany. The EU is exploring legislative efforts to protect its industries, such as the Industrial Accelerator Act and revisions to the Cyber Security Act, but these measures won’t be implemented until 2027. Meanwhile, Beijing remains in a strong position, potentially complicating the EU’s efforts to counterbalance China’s influence.