The coming EU-China trade war? Europe’s response to Chinese overcapacities
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The coming EU-China trade war?
Europe’s response to Chinese overcapacities
Against the backdrop of the intensifying debate around a potential “China Shock 2.0”, European policymakers are increasingly grappling with the implications of Chinese industrial overcapacities for Europe’s competitiveness, industrial base, and economic security.
As discussions gain momentum in Brussels and among EU member states on possible safeguard measures, new tariffs, and diversification requirements, the briefing analyzes the strategic choices facing Europe and the potential consequences for businesses exposed to both the Chinese and European markets.
The briefing further examines how a shift in the EU’s China policy could affect sectors ranging from automotive and machinery to chemicals, aerospace, and semiconductors, and what companies should monitor as the debate evolves in the coming months.
Executive Summary
The China Shock 2.0 presents Europe, and Germany, with a stark choice: accept industrial erosion and dependence by absorbing Chinese overcapacities over the next years or face immediate damage from a potentially tough trade war.
The EU could impose safeguard measures, propose new tariffs or a diversification instrument to restrict trade with China, but it is unclear whether it can raise protections to sufficient levels.
While China has an interest in a negotiated solution given the importance of the EU market for its exports, it may already have determined (or come to do so) that a strategy of threats, intimidation, and retaliation can minimize EU restrictions.