Europe is grappling with a renewed economic challenge from China that threatens to undermine its local manufacturing sector, potentially leading to significant job losses and increasing industrial dependence on Beijing. Analysts and industry representatives point to the falling exchange rate and the support for struggling Chinese firms as reminiscent of the “China shock” that hit the United States around 25 years ago. This term originally described the upheaval caused by China’s ascension to the global trade arena after joining the World Trade Organization, which saw a surge in imports displacing U.S. industries and resulting in the loss of up to 2.5 million jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, emphasized that the core issue isn’t just Chinese finished goods like electric vehicles but the vast amount of components Europe imports from China, increasing dependency.
The European Union faces critical decisions as Chinese components become integral to its industrial framework. The Financial Times recently reported that the EU might require companies to purchase critical components from at least three different sources to mitigate risks. European commissioners are set to convene on May 29 for urgent discussions on potential measures. Oliver Richtberg, head of foreign trade at VDMA, a European and German machinery and equipment manufacturing trade organization, praised the EU’s proactive approach, contrasting it with Berlin’s. Richtberg highlighted that state subsidies in China make their products more affordable, compounded by exchange rate changes that have potentially undervalued the yuan by 40% against the euro, limiting procurement options for European businesses.
Richtberg explained that choosing Chinese suppliers becomes a rational decision when their products offer 95% of the quality at a 30-50% lower cost compared to European counterparts. He stressed the unfairness of this situation, citing the loss of 22,000 jobs in the German machinery industry last year alone. Soapbox, a China trade monitoring site, noted alarming data regarding the import of amino acids and polyhydric alcohols from China, with the EU importing 52% of amino acid ingredients by value, but 88% by volume, and 96% of polyhydric alcohols by volume. The site’s author warned that cheap Chinese inputs risk making EU production unviable, increasing dependence on China.
Trade data reveals China’s growing trade surplus with the EU, with some arguing that the 2024 EU tariffs on Chinese electric vehicles had little impact due to exchange rate effects. Andrew Small, director of the Asia program at the European Council on Foreign Relations, remarked that the dynamics of the China shock persist, with the EU’s current measures falling short of addressing import levels. China has become Germany’s top trading partner, with the trade surplus doubling between 2024 and 2025, resulting in significant job losses in Germany’s industrial sector, notably in car manufacturing.
Eskelund expressed concern over Europe’s increasing reliance on China, noting that 26% of European Chamber members are expanding operations in China. This trend, he warned, could lead to deindustrialization, with Germany losing 10,000 to 15,000 jobs monthly. The EU has proposed the Industrial Accelerator Act and an update to the Cyber Security Act of 2019 to protect its industries, but these measures won’t take effect until 2027. Small emphasized the need for immediate action, acknowledging that tariffs were insufficient and highlighting China’s strategic position in the ongoing trade dynamics.