The Coming Clash Between China and Europe |
In 2025, Chinese leader Xi Jinping tried to capitalize on U.S. belligerence toward Europe by promoting China as the responsible great-power alternative. In a message sent to mark the 50th anniversary of diplomatic relations between China and the European Union, Xi invited Brussels to join forces with Beijing, to “uphold multilateralism, safeguard fairness and justice,” and “oppose unilateralism and bullying.” Despite the lofty rhetoric, Beijing offered nothing of substance to Europeans, and did nothing to address their concerns about unfair trade practices that are threatening large swaths of European industry. Indeed, rather than seeking to conciliate, Chinese premier Li Qiang recently dismissed the concerns of Europeans worried about a “China Shock 2.0,” telling them to focus instead on “China Opportunity 2.0.”
Key EU leaders, as well as the Brussels bureaucracy, are not buying it. They have concluded that the very survival of Europe’s core industries is threatened by China. The first “China shock” describes the devastation of U.S. industry in sectors including furniture, textiles, and metals that came in the early 2000s, after China’s accession to the World Trade Organization. The new China shock will be different. It will happen mainly in Europe, and it will be more severe, devastating advanced industrial sectors—including automotive, machinery, chemicals, pharmaceuticals, and green energy—and leading to immense job losses.
Increasingly, European leaders are arguing that the EU needs to take action to protect its industries. So severe is the threat that measures that were unthinkable a few years ago are now gaining momentum. Earlier this year, for example, the French government proposed “establishing a level of protection equivalent to a general tariff of around 30 percent vis-à-vis China.” And although Germany was initially hesitant, Chancellor Friedrich Merz has signaled that he is ready to act to deal with China’s unfair trade practices. Last month, every EU leader, with the exception of Spain, tasked the European Commission with coming up with options for action.
An all-out trade war with China is becoming a real possibility. Europe is now the only major market with high purchasing power that is wide open to Chinese products. With Chinese domestic demand weak and many firms struggling to make a profit, Beijing desperately needs the European market. As a consequence, Beijing is likely to do everything possible to keep it open. If Brussels wants to have a fighting chance in the looming trade war, it will need to ensure maximum unity of its members, as well as wide-ranging cooperation with like-minded partners. Neither will be easy. But both will be necessary if Europe is to preserve the industrial base that is vital to its prosperity and security.
A decade ago, European policy toward China was defined by complacency. In 2015, Beijing published its Made in China 2025 strategy, which established the goal of displacing European industrial leadership. Few Europeans took these ambitions seriously. European industrial leaders held dominant positions both in the Chinese market and globally, and they believed that Chinese competitors would never be able to catch up with their innovative products. When U.S. President Donald Trump began a trade war with Beijing during his first term, many Europeans rejected his diagnosis of an unsustainable trade deficit with China. The complacency continued. For much of the Biden administration, Brussels appeared more worried by the industrial policy subsidies in the U.S. Inflation Reduction Act—which it feared would put European industry at a disadvantage—than by competition with China. All the while, Beijing methodically poured billions into building its industrial champions to take on European competitors.
Gradually, it became more........