China’s High-Tech Export Surge Imperils European Industry
Europe’s economies are currently grappling with the profound implications of a ‘second China Shock.’ In 2025, the European Union’s (EU) trade deficit with China escalated to approximately €400 billion. Concurrently, China’s global trade surplus reached a record $1.2 trillion, a scale deemed unsustainable for the rest of the world to absorb by the WTO Director-General. Germany, in particular, saw its trade deficit with China hit an unprecedented €87 billion in 2025, marking a €20 billion increase from the previous year. These figures underscore a significant structural shift, threatening the very foundation of European industry beyond mere trade imbalances.
This ‘shock’ distinctly differs from the initial impact felt in the early 2000s, which stemmed from China’s entry into the WTO and its export of low-cost consumer goods. While that era primarily affected low-value-added sectors, the current wave directly challenges Europe’s core high-tech and green technology industries, including electric vehicles (EVs), lithium batteries, solar panels, wind turbines, machinery, and chemicals. China’s industrial capacity far outstrips its domestic demand. This overcapacity, coupled with substantial government subsidies, leads to exports at artificially low prices. Such practices distort fair competition within European markets and severely compress the profitability of European companies.
Deindustrialization Risks and Shifting Competitive Landscapes
European nations now face serious deindustrialization concerns amidst this economic realignment. Germany’s industrial output has declined by approximately 10% since 2022, with an estimated 10,000 industrial jobs lost each month. Volkswagen, in a strategic move to counter intensified Chinese competition, announced plans to close four car plants in Germany and cut 100,000 jobs. Across the EU, rising Chinese exports contribute to the loss of up to 500 manufacturing jobs daily.
China now accounts for roughly 30% of global manufacturing output, with high-tech manufacturing contributing 41% of its manufacturing value added in 2022. Between 2024 and 2025, Chinese car exports to Europe surged by 26%, reaching nearly 1.2 million vehicles. Imports of Chinese hybrid vehicles alone jumped by 155%. Recognizing this escalating threat, the European Commission initiated an anti-subsidy investigation into Chinese battery electric vehicles (BEVs) in October 2023. The provisional findings indicate unfair subsidization causing or threatening economic injury to EU BEV producers. Countervailing duties are set to be imposed from July 4, 2024, if a WTO-compatible solution is not reached. The EU is also considering trade defense measures against Chinese wind turbines and steel.
French President Emmanuel Macron and German Chancellor Friedrich Merz have called for joint action to shield European industry, emphasizing the urgency to avoid a repeat of the industrial hollowing-out experienced by the U.S. decades ago. However, internal divisions persist within Europe, with some member states, notably Germany, expressing apprehension about antagonizing Beijing due to their significant trade ties.
Forging Europe’s Path Forward: Protection and Innovation
Europe must forge a unified and robust strategy to counter China’s high-tech export offensive. In the short term, the EU needs to actively deploy its trade defense instruments to rectify unfair competition. Beyond anti-subsidy and anti-dumping investigations, the EU could leverage new trade tools like the Carbon Border Adjustment Mechanism (CBAM) to address low-priced imports that circumvent environmental regulations. In the medium to long term, Europe must redefine its industrial policy to bolster its intrinsic competitiveness.
European companies should diversify supply chains to reduce dependence on China and enhance their indigenous innovation capabilities in critical technological sectors. Initiatives such as the ‘Net-Zero Industry Act’ are crucial for supporting domestic industries and securing strategic autonomy. Furthermore, Europe must deepen its single market integration and significantly increase investment in research and development to reclaim leadership in future high-tech sectors. Whether Europe can successfully defend and rebuild its industrial base against China’s industrial prowess hinges on forthcoming policy decisions and the industry’s commitment to innovation. The imperative extends beyond merely criticizing China; it demands that Europe actively addresses its own structural weaknesses and proactively prepares for the future.
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