The United States’ protectionist posture towards China is exerting considerable strain on the European Union. Economists and industry leaders are alerting to an impending “China shock” for European enterprises, with acute apprehension for sectors such as machinery, wind turbine production, and the automotive industry. “A China shock is imminent in some sectors, and in others, it has already occurred,” remarked IfW President Moritz Schularick in an interview with Handelsblatt.
The core of the dilemma is China’s enormous production capabilities in pivotal industries. With sluggish domestic demand, Chinese firms are fervently pursuing international markets.
The United States is resistant to accepting these products. It is expected that President Joe Biden’s administration will soon declare a substantial escalation in tariffs on Chinese imports, possibly as early as Tuesday. Reports from American media suggest that tariffs on Chinese electric vehicles, for example, may surge from 25% to 100%.
This situation intensifies the pressure on the European Commission to safeguard the European market. The Commission has already launched investigations into Chinese subsidies in various sectors. A resolution concerning Chinese electric vehicles is anticipated by the end of July. Insiders indicate that the tariffs could range between 25% and 40%. The German business sector is also pressing European authorities to implement protective measures.
European policymakers now face the challenge of balancing open markets with the need to shield local industries from unfair competition. The results of these discussions could profoundly affect the future of European economic stability and growth.
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