China shock risk: EU industry’s growing reliance on Chinese imports

A surge in Chinese component and intermediate goods shipments to Europe has prompted warnings from trade analysts and industry representatives of a possible renewed “China shock,” risking factory closures, job losses and de facto industrial dependence.

The development has been driven by rapidly rising import volumes in key inputs and components. Chinese customs data cited by analysts show the trade surplus with Germany rising from $12bn in 2024 to $25bn in 2025, with Chinese exports to Germany reaching $118bn while Germany’s exports to China fell to $93bn; such shifts are particularly marked in electric vehicle parts, permanent magnets and certain chemical intermediates.

In response, EU institutions are debating short- and medium-term measures to reduce dependency, including rules to nudge companies toward non-Chinese suppliers and discussions at the Commission level later this month; targeted tariffs, safeguards and other trade defence tools are under consideration to counteract alleged unfair competition and excess capacity. These policy options are intended to protect strategic sectors without triggering blanket protectionism.

Markets and industries are already reacting: the flow of low-cost Chinese goods is exerting margin pressure for some European manufacturers, while the prospect of stronger trade defence measures increases uncertainty about input costs and investment plans. Prior moves — such as recent tariff increases on steel and tighter controls on low-value imports — indicate Brussels is willing to deploy trade policy tools more aggressively in sectors under stress.

Analysts say volatility is likely to persist in the near term; medium-term outcomes will depend on the scope and speed of EU policy responses, success in diversifying suppliers, and whether companies re-shore critical capacity. If policy action is delayed or limited, experts warn, the bloc could face significant structural consequences for employment and industrial capacity, reinforcing calls for a coordinated industrial strategy. Market participants will closely watch Commission debates and any concrete measures announced in the coming weeks.