Europe is grappling with a renewed challenge from China, which poses a threat to local manufacturing sectors and could lead to significant job losses, according to trade analysts. The situation is reminiscent of the so-called “China shock” experienced by the United States 25 years ago, following China’s entry into the World Trade Organization. This development led to increased imports and the displacement of local industries, costing up to 2.5 million jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlights the growing dependency on Chinese components in European industries, rather than finished goods like electric vehicles, as a significant concern.
As Chinese components become more integrated into the European Union’s industrial framework, the EU faces critical decisions. The Financial Times reports that the EU is contemplating requiring companies to source critical components from multiple suppliers to mitigate this dependency. European commissioners are set to convene on May 29 to discuss potential strategies. Oliver Richtberg of VDMA, representing the machinery and equipment manufacturing industry, emphasizes the engagement of Brussels in addressing these issues, in contrast to Berlin. He points out that state subsidies in China make their products cheaper, a situation exacerbated by a devalued yuan, which is reportedly 40% undervalued against the euro according to economist Jürgen Matthes.
Richtberg notes the competitive disadvantage faced by European manufacturers, observing that Chinese suppliers offer products of comparable quality at substantially lower prices. This economic pressure has already led to the loss of 22,000 jobs in Germany’s machinery sector in the past year alone. A trade consultant’s analysis, in collaboration with the Mercator Institute for China Studies, indicates that the EU’s reliance on Chinese imports is more extensive than previously thought, with significant imports of amino acids and polyhydric alcohols from China, posing a risk to local production sustainability.
The widening trade imbalance is evident as China’s trade surplus with the EU continues to grow, challenging the effectiveness of measures like the 2024 EU tariffs on Chinese electric vehicles. Andrew Small from the European Council on Foreign Relations notes that the tools used by the EU so far are insufficient to address the high levels of imports. With China now Germany’s leading trading partner, the situation has resulted in significant job losses, particularly in car manufacturing, where 51,000 jobs were lost between 2024 and 2025. Eskelund expresses concern about the existential threat posed by the growing reliance on China, warning of potential security implications for Germany.
The EU has introduced legislative proposals like the Industrial Accelerator Act and an update to the Cyber Security Act to protect its industries, but these measures will not take effect until 2027 or later. Small stresses the need for immediate action and notes the political challenges in implementing tariffs. As Europe seeks to navigate this economic landscape, China is perceived to hold a strategic advantage, potentially complicating efforts to balance trade relations.