Europe is grappling with a new wave of challenges from China that could threaten local manufacturing and result in job losses, according to trade analysts and industry representatives. This situation evokes memories of the “China shock” experienced by the US roughly 25 years ago, when China emerged as a formidable player in global trade following its entry into the World Trade Organization. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlighted that the issue stems not just from finished goods like electric vehicles, but from the substantial volume of components imported from China, making Europe increasingly reliant on the Asian giant.
The European Union faces critical decisions as Chinese components become entrenched in its industrial framework. A report suggests the EU is considering mandating that European companies source critical components from at least three different suppliers to mitigate risks. An upcoming meeting of European commissioners on May 29 aims to address these concerns. Oliver Richtberg of VDMA, a leading trade organization, praised Brussels’ proactive approach but criticized Berlin’s engagement. Among the factors contributing to the competitive pricing of Chinese products are state subsidies and a currency exchange rate that has left the yuan potentially 40% undervalued against the euro, as noted by economist Jürgen Matthes.
The extent of Europe’s dependency on Chinese imports is alarming, with certain industries significantly affected. For instance, the EU imports 52% of amino acids from China by value, but the figure jumps to 88% by volume. In the case of polyhydric alcohols, used in various products, 96% of EU imports by volume come from China. The risk, as identified by a trade consultant associated with the Mercator Institute for China Studies, is not just about purchasing cheaper imports but about the long-term sustainability of EU production, which could become uneconomic and increase dependency on China.
China’s trade surplus with the EU is expanding, undeterred by recent tariffs on Chinese electric vehicles. Andrew Small from the European Council on Foreign Relations pointed out that current EU measures are insufficient to manage the import levels effectively. China has surpassed the US as Germany’s top trading partner, with its surplus with Germany doubling from $12 billion to $25 billion between 2024 and 2025. The reliance on China poses not just economic challenges but also potential security concerns, as noted by Eskelund, who highlighted Germany’s significant job losses, particularly in the car manufacturing sector.
In response, the EU has proposed legislative measures like the Industrial Accelerator Act and an update to the Cyber Security Act, aimed at protecting its industries. However, these will not be effective until 2027, leaving Europe searching for immediate solutions. Small emphasized that while tariffs were a significant political effort, they were insufficient. The dynamics of the relationship suggest that China holds substantial influence, capable of complicating any EU measures designed to curb its export flow.