TOP BIT
“The greatest victory is the one that requires no battle.” Sun Tzu
China’s industrial strategy is paying off—Beijing is replacing European imports with domestic products, from EVs to wind turbines. While the West leans on tariffs, China scores with subsidies, industrial policy, and a weak yuan. The result: Europe’s exports to China are collapsing, the trade deficit is growing, and Germany in particular is stumbling. At the same time, the EU is also losing ground to the US.
The Details
📉 Export Decline: China’s demand for European industrial goods has been falling for years, hitting autos, machinery, and chemicals hardest.
⚡ Strong Domestic Production: China now leads in batteries, solar panels, EVs, rail technology, industrial robotics, and specialty chemicals.
💶 Currency Weapon: The yuan’s drop against the dollar further cheapens Chinese goods; analysts say Beijing is propping it up via state banks.
🇺🇸 Unfavorable US Deal: The EU accepted a blanket 15% tariff on exports to the US—and even thanked Trump when it was announced. It was touted as the “biggest deal ever,” despite restricting trade.
Why It Matters
Second China Shock Hits Europe Hard: Unlike the first shock affecting textiles and toys, this wave targets Europe’s industrial core—especially painful for Germany.
Beijing’s Strategy Wins: Instead of raising tariffs, China focuses on targeted support, aggressive expansion, and technological self-reliance.
EU Lacks a Response: While Beijing plans long-term and Washington forces deals its way, the EU is left without clear answers—key industries like wind power and magnet production fall behind.
Background
China is increasingly substituting European products in its domestic market with home-grown alternatives, while its exports in many industrial sectors continue to rise. At the recent EU-China summit, differences over overcapacity, subsidies, and market access were laid bare. Although the EU stressed the need for fair trade, it failed to secure concessions on critical issues.
Simultaneously, transatlantic relations have come under strain after the EU agreed to a controversial US tariff package.
📊 All Data & Details: CFR, SCMP, SCMP II
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