China Shock Looms Over Europe

China Shock Looms Over Europe

The United States’ protectionist stance against China is putting pressure on the European Union. Economists and business leaders are warning of a “China shock” for European companies, with particular concern for sectors like machinery, wind turbine manufacturing, and the automotive industry. “A China shock is imminent in some sectors, and in others, it has already occurred,” IfW President Moritz Schularick told Handelsblatt.

The crux of the issue lies in China’s vast production capacities in key industries. Faced with weak domestic demand, Chinese companies are aggressively targeting global markets.

The United States is not willing to accept these products. It is anticipated that President Joe Biden’s administration will announce a significant increase in tariffs on Chinese goods as early as Tuesday. According to American media reports, tariffs on Chinese electric vehicles, for instance, are expected to rise from 25% to 100%.

This development heightens the pressure on the European Commission to protect the European market as well. The Commission has already initiated investigations into Chinese subsidies across various sectors. A decision regarding Chinese electric vehicles is expected by the end of July. Insiders suggest that the tariffs will likely range between 25% and 40%. The German business community is also urging European authorities to take protective measures.

European policymakers are now tasked with finding a balance between open markets and protecting local industries from unfair competition. The outcome of these deliberations could significantly impact the future of European economic stability and growth.