Europe finds itself confronting a renewed economic challenge from China that could result in the erosion of local manufacturing sectors and significant job losses, according to trade experts and industry representatives. This emerging situation draws parallels to the “China shock” experienced by the United States around 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 the loss of approximately 2.5 million jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, warns that the real issue lies not with finished goods like electric vehicles, but with the massive influx of components from China, which is increasing Europe’s dependency on the Chinese supply chain.
The European Union is at a crossroads as Chinese components become increasingly vital to its industrial sectors. A report indicates that the EU may mandate European companies to diversify their suppliers for crucial components. Urgent discussions are scheduled among European commissioners to address these challenges. Oliver Richtberg, who leads foreign trade at VDMA, an organization representing the machinery and equipment manufacturing industry, praises Brussels for its proactive stance. However, he voices concerns about the effect of China’s undervalued yuan, which has made Chinese products significantly cheaper due to state subsidies, contributing to a loss of market share and jobs in European industries.
Data from Soapbox, a China trade monitoring site, highlights the extent of European reliance on Chinese imports. For instance, the EU imports 88% of amino acids and 96% of polyhydric alcohols from China by volume. This dependency poses a threat to the EU’s economic sustainability, as low-cost Chinese imports undermine local production, making it uneconomical. As China becomes Germany’s leading trading partner, the trade imbalance has widened, with a substantial surplus favoring China. This shift has led to the loss of an estimated 250,000 industrial jobs in Germany since 2019, particularly affecting the car manufacturing sector.
Jens Eskelund underscores the existential threat posed by Europe’s increasing reliance on China, with job losses in Germany potentially reaching 15,000 per month. This dependence could evolve from an economic issue to a security concern. Meanwhile, the EU is exploring legislative measures like the Industrial Accelerator Act and updates to the Cyber Security Act to safeguard its industries, though these will not be implemented until 2027. Andrew Small, director of the Asia programme at the European Council on Foreign Relations, suggests that current EU strategies may not be sufficient to counteract the growing import levels from China, and that political efforts to impose tariffs have not adequately addressed the trade imbalance.
The EU must carefully navigate its response to the challenges posed by China, considering the likely adverse reaction from Beijing. Despite the potential countermeasures at the EU’s disposal, Small notes that China holds a dominant position and can hinder the EU’s efforts by complicating processes, ensuring the continued flow of Chinese exports to Europe. This dynamic underscores the complexity of addressing the economic impacts of China’s growing influence on European industries.