Europe faces a new wave of deindustrialization as it struggles to counter China’s economic dominance.

Germany and Europe are grappling with a ‘China Shock 2.0,’ as industries like machinery, chemicals, and automotive face mounting pressure from Chinese competition. Despite this, many European companies, including partially state-owned Volkswagen, are deepening their reliance on China, with plans to produce and develop more vehicles there. Calls for stronger protective measures are growing louder, with German Chancellor Friedrich Merz advocating for a new Plaza Accord to force an appreciation of the Chinese renminbi, making Chinese exports more expensive.

However, experts warn that Europe’s fragmented internal politics and weaker economic position compared to the United States make it ill-equipped for a trade war with China. While China’s export dependency is seen as a potential leverage point, Beijing has shown resilience and an unwillingness to compromise, even under pressure from the U.S. The harsh reality is that Europe lacks a quick fix for its deindustrialization crisis, as industrial competitiveness takes decades to rebuild.