Europe is grappling with a renewed “China shock” that poses a threat to its local manufacturing industries, potentially leading to job losses and increased dependency on Chinese imports, according to trade analysts and industry experts. The situation bears similarities to the crisis in the United States 25 years ago, when China’s entry into the World Trade Organization resulted in a surge of imports that displaced local industries and cost millions of jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlighted that the issue is not limited to finished goods like electric vehicles but also extends to the vast quantity of components being imported from China, thereby increasing Europe’s reliance on the Asian giant.
As the European Union (EU) faces the challenge of an ingrained dependence on Chinese components, the bloc is contemplating measures to mitigate the situation. A report released this week suggests that the EU may require European companies to source critical components from at least three different suppliers. In light of these developments, European commissioners are set to convene on May 29 for urgent discussions on potential strategies. Oliver Richtberg, head of foreign trade at VDMA, commended Brussels for its proactive approach, contrasting it with Berlin’s response. He pointed out that Chinese products benefit from state subsidies that are not feasible in Europe, coupled with significant currency exchange rate shifts that make Chinese goods more attractive to European procurement managers.
Richtberg warned that the reliance on cheaper Chinese imports is causing Europe to lose market share and putting its industries under immense pressure. In Germany alone, the machinery sector lost 22,000 jobs last year. The situation is further exacerbated by data from Soapbox, a trade watch website, which shows a worrying trend of industrial cannibalization, particularly in sectors like amino acids and polyhydric alcohols, where the EU relies heavily on Chinese imports. This dependence not only threatens the EU’s economic stability but also raises concerns about its security, as highlighted by Eskelund, who noted that a significant portion of European companies is increasing their presence in China.
Despite these challenges, the EU has introduced two legislative proposals: the Industrial Accelerator Act, known as the “made in EU” law, and an updated Cyber Security Act, aimed at reducing dependency on Chinese imports. However, these measures will not be implemented until 2027, leaving the EU under pressure to find immediate solutions. Andrew Small, director of the Asia programme at the European Council on Foreign Relations, emphasized that although tariffs were introduced, they are insufficient to rectify the trade imbalance. The EU faces a delicate balancing act, as any decision must be carefully weighed against potential retaliation from China, which is seen as holding the advantage in this trade dynamic.
As China strengthens its position as Germany’s top trading partner, surpassing the US, the trade surplus with Germany has doubled, contributing to a significant loss of industrial jobs. This growing reliance on China is not only an economic concern but also a potential security issue. Small remarked that China remains underrepresented in discussions about the future of European industry, indicating a need for more robust and immediate action to safeguard the EU’s economic interests.