Why Europe is Facing Up to the China Shock Now - The Wire China
Chinese President Xi Jinping, fourth left, listens to European Council President António Costa, second right, and European Commission President Ursula von der Leyen, third right, during the opening remarks of. . .
Chinese President Xi Jinping, fourth left, listens to European Council President António Costa, second right, and European Commission President Ursula von der Leyen, third right, during the opening remarks of the European Union-China Summit in Beijing, China, July 24, 2025. Credit: Andres Martinez Casares /Pool Photo viaAP ImagesA number is haunting the European Union: 1 billion euros a day. That’s the rate at which the bloc’s trade deficit with China in goods is widening,reaching31. 9 billion euros per month ($37. 3 billion) in April this year. As imports from China surge and major European industries hollow out, solving the trade challenge has shot to the top of the EU’s priority list. Ongoing trade defence investigations against Chinese imports into Europe. Credit:European CommissionSince the beginning of June, Brussels hasopenednine new investigations against Chinese imports. The European Councilmetin mid-June to debate new mechanisms to meet the economic challenge. And at the end of the month, European and Chinese trade officialssetan October deadline to develop a joint plan of action. “This is not just about cheap imports,”saidEU President Ursula von der Leyen at a June 18 press conference. “We see overcapacities that erode our own manufacturing base. And this is simply not sustainable. ”In this week’s Big Picture,The Wire Chinaexamines the changes in EU-China trade that have pushed it to finally confront the China shock. Europe’s goods trade deficit with China reached arecordof 397. 3 billion euros ($439. 7 billion) in 2022, as the continent faced the twin challenges of Covid and Russia’s invasion of Ukraine. Trade flows began to balance out through 2023, but the deficit widened again to 360 billion euros ($422. 8 billion) last year, the second-largest level ever. Source:Capital EconomicsThe most significant change has taken place in Germany, Europe’s biggest economy. It used to consistently run a goods trade surplus with China: now its deficit is at its widest on record. But other major European companies have seen their goods trade deficits with China widen too. Source:EurostatChina’s exports to Germany increased by 10 percent each year between 2023 and 2025, Chinese customsdatashows. German exports to China have not kept pace,fallingby 25 percent since January 2024. “The driver behind Germany’s change of heart is a collapse in its export business to China, which you can only describe as dramatic,” saysSander Tordoir, chief economist at the think tank Centre for European Reform. “Germany was long the western country with the largest China business in relative terms, and that is rapidly slipping away. ”Source:German Federal Statistical OfficeEurope’s manufacturing sector has borne the brunt of the economic pressure, as China has rapidly increased its exports of electronics, machinery and autos. Job levels in manufacturing and industry had been recovering after the Covid shock, but are now in decline again. Source:EurostatManufacturing job cuts are hitting Europe’s carmakers especially hard. Germany’s Volkswagen has floated a plant to cut up to 100,000 jobs,Reutersreportedlast month — a red flag for an industry thatprovidesdirect and indirect employment to 13. 8 million Europeans and represents over 7 percent of the EU’s GDP, according to the European Commission. Chinese carmakers have eaten away at the market share of their European counterparts. In 2019, Europeproducedone in four cars globally, on par with China. But by 2025, Europe’s share of global car production had sunk to 18 percent while China’s hadsoaredto nearly forty, according to the European Automobile Manufacturers’ Association. Source:ACEAThe loss of jobs has added to pressure on European politicians to act. Economic instability has fueled the rise of extremist political parties, ahead of major elections due in France, Spain and Italy among others by the end of next year. Nearly one in four European voters now prefer far-right populist parties, according to data fromThe PopuList, which tracks populist, far-left, and far-right parties across Europe. Source:The PopuListSavannah Billman is a Staff Writer forThe Wire Chinabased in NYC. She previously worked at the National Committee on U. S. -China Relations. Cover StoryThe Sun Sets for Chinese Solar in the U. S. Major Chinese solar companies are in a rush to reverse big investments as American firms look to build homegrown supply chains. EssayAmerica’s EV ReckoningXi Jinping’s zero-Covid policy sealed China off from the outside world for almost three years. Joshua Busby, a Biden-era climate advisor to the Pentagon and professor at the University of Texas at Austin, recently returned. . . Q & ACorporate Risk Intelligence for National Security, Compliance & Due DiligenceLearn More