Europe is grappling with a renewed economic challenge from China, as concerns grow over the increasing dependence on Chinese imports, which could undermine local industries and lead to significant job losses. This situation draws parallels to the “China shock” experienced by the United States 25 years ago, following China’s entry into the World Trade Organization. During that period, a surge in Chinese imports displaced numerous American industries, resulting in the loss of as many as 2.5 million jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, cautions that the real issue lies not in finished goods like electric vehicles but in the vast quantity of components being sourced from China, making Europe ever more reliant on Chinese supplies.
As Chinese components become deeply integrated into the European Union’s industrial framework, European leaders face tough decisions. Reports indicate that the EU is considering mandating companies to procure critical components from a minimum of three different suppliers. This move is prompted by the recognition of the challenges posed by state subsidies in China, which make their products more affordable compared to European counterparts. Additionally, fluctuations in exchange rates over the past five years have reportedly left the yuan undervalued against the euro by up to 40%, further complicating procurement decisions for European businesses.
The European machinery sector is particularly feeling the strain, with VDMA’s Oliver Richtberg highlighting the competitive pressure from cheaper Chinese alternatives that are nearly on par in quality. This economic dynamic is leading to significant job losses; Germany alone saw a reduction of 22,000 jobs in its machinery industry last year. The increasing dependency on China is alarming, with trade data revealing that the EU imports a large portion of certain goods, such as amino acids and polyhydric alcohols, predominantly from China. Such reliance on low-cost supplies risks making EU production unsustainable, potentially leading to greater dependency on China.
China’s trade surplus with Europe continues to expand, with Germany now counting China as its top trading partner. Between 2024 and 2025, Germany’s trade deficit with China doubled, highlighting the growing economic imbalance. The broader implications of this reliance are prompting existential concerns, as further deindustrialization could elevate economic issues to national security concerns. Legislative efforts are underway in the EU to protect its industries, including proposals like the Industrial Accelerator Act and updates to the Cyber Security Act, but these measures will not take effect until 2027.
The EU is under pressure to find immediate solutions to the challenges posed by Chinese imports, while navigating the potential diplomatic fallout with China. Despite some efforts to address the trade imbalance through tariffs, experts like Andrew Small from the European Council on Foreign Relations argue that such measures are insufficient. The political and economic complexities of the situation demand careful handling, as China remains pivotal in the global supply chain, and any EU countermeasures must be strategically balanced to avoid significant disruption.