Europe is grappling with a renewed “China shock,” which poses a significant threat to local manufacturing sectors and could lead to job losses and increased industrial dependency on Beijing. Trade analysts and industry representatives have expressed concerns that the current situation echoes the crisis faced by the US 25 years ago. At that time, China’s entry into the global trade market resulted in a surge of imports that displaced local industries, resulting in the loss of up to 2.5 million jobs. Jens Eskelund, the president of the European Chamber of Commerce in Beijing, highlighted the deepening dependence on Chinese components, stating that it is not just finished goods like electric vehicles but the sheer volume of components that Europe is importing from China.
The European Union is now confronting critical decisions as Chinese components become increasingly integrated into its industries. A recent report suggests that the EU is considering a strategy to require companies to source critical components from at least three different suppliers. Urgent discussions among European commissioners are scheduled for May 29 to address potential measures. Oliver Richtberg of VDMA, a leading trade organization in Europe, has praised Brussels for its proactive approach in seeking data and insights, contrasting it with the lack of engagement from Berlin. The undervaluation of the yuan against the euro, potentially up to 40%, has also been cited as a factor forcing procurement decisions towards Chinese suppliers, despite the quality parity with European products.
The reliance on China is manifesting in significant economic impacts, according to a trade consultant associated with the Mercator Institute for China Studies. For instance, 52% of amino acids by value, but 88% by volume, are imported from China by the EU, indicating a heavy dependency. Similarly, 96% of polyhydric alcohols, crucial for various products, originate from China. This growing reliance is not only undercutting EU industries but also leading to job losses, particularly in Germany, where the machinery industry alone saw a reduction of 22,000 jobs last year.
China has now become Germany’s top trading partner, surpassing the US, with a trade surplus that has doubled from $12 billion to $25 billion between 2024 and 2025. The job market in Germany has been significantly affected, with an estimated 250,000 industrial jobs lost since 2019, including a steep decline in the car manufacturing sector. Eskelund warned that the increasing reliance on China could soon transition from an economic issue to a security concern for Germany. Meanwhile, the EU’s legislative efforts, including the Industrial Accelerator Act and an update to the Cyber Security Act, will not be effective until 2027, putting pressure on Brussels for immediate solutions.
Andrew Small from the European Council on Foreign Relations pointed out that the current measures by the EU have not effectively addressed the import levels from China. Despite political efforts to implement tariffs, these measures have fallen short in correcting the trade imbalance. The EU is now tasked with finding ways to protect its industries without provoking a hostile reaction from China, which remains in a powerful position. Small noted that China only needs to complicate the EU’s countermeasures to maintain its export flow, underscoring the challenges Europe faces in asserting trade independence.