Europe is grappling with a renewed “China shock” that poses a threat to its local industries, prompting concerns of job losses and heightened industrial dependency on Beijing, according to trade analysts. This latest disruption draws parallels with the crisis faced by the United States 25 years ago, when China’s entry into the World Trade Organization led to a surge in imports that displaced local industries and resulted in significant job losses. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlighted that the issue goes beyond the import of Chinese finished goods like electric vehicles, pointing to the substantial volume of components coming from China that is increasing European dependency.
The European Union is now at a crossroads, as it considers forcing companies within the bloc to source critical components from at least three different suppliers to mitigate reliance on China. This comes amid urgent discussions among European commissioners, with a meeting scheduled for May 29 to explore possible measures. Oliver Richtberg, head of foreign trade at VDMA, praised Brussels for its proactive approach but criticized Berlin’s engagement level. He cited state subsidies and exchange rate shifts, which have rendered Chinese products significantly cheaper, as major factors affecting European industry competitiveness. German economist Jürgen Matthes pointed out the yuan’s potential undervaluation against the euro, exacerbating the situation for procurement teams.
The impact of this reliance is already being felt, with Germany losing approximately 22,000 jobs in its machinery industry over the past year. The trade watch website Soapbox, along with the Mercator Institute for China Studies, highlighted alarming data showing the EU’s heavy reliance on Chinese imports for essential goods like amino acids and polyhydric alcohols, with imports soaring as high as 96% by volume for some products. The concern is not only about buying cheap inputs but also about the risk of EU production becoming unviable, leaving the region dependent on China.
China’s trade surplus with the EU continues to grow, with Germany now importing more from China than it exports. This has significantly impacted industrial jobs, with an estimated 250,000 jobs lost in Germany since 2019, particularly in car manufacturing. The growing reliance on China has led to calls for urgent legislative measures. The EU has proposed two legislative acts aimed at safeguarding its industry, but these are not expected to be implemented until 2027. Andrew Small from the European Council on Foreign Relations emphasized the need for immediate action, as the current measures fall short of addressing the trade imbalance.
With China now Germany’s top trading partner, surpassing the US, the situation is becoming increasingly complex. The EU’s attempts to address the issue are met with challenges, as any new countermeasures risk provoking a hostile response from Beijing. Small noted that China only needs to disrupt the EU’s efforts enough to maintain its export flow. As European leaders deliberate on the next steps, the urgency to find solutions that can protect the region’s industries without escalating tensions with China remains a critical focus.