Rising competition from China creates employment problems, according to the ECB

According to a recent study by the European Central Bank (ECB), trade tensions with the US, leading China to export more to the Eurozone, may cause problems. This could lead to fewer job opportunities for Europeans and increased unemployment. The study, by ECB senior economists Clémence Berson, Claudia Foroni, Vanessa Gunnella and Laura Lebastard, was published as part of the ECB’s Economic Bulletin, Issue Five/2025.

Manufacturing sector particularly exposed to trade shocks and Chinese import penetration

"Growing competition from China in global export markets has affected the Eurozone labour market in recent years. With China’s rise in the value chain, its exports have increasingly challenged European companies both domestically and in third-country markets (Banin et al., 2025). This competition is no longer limited to low-cost goods. It extends to high value-added sectors, such as automotive and specialised machinery (Al-Haschimi et al., 2024). High US tariffs on China could further increase competition for Eurozone manufacturers if Chinese exporters expand or seek new markets in Europe. This box analyses the implications of increased Chinese competition for Eurozone employment, exploring how changes in labour demand are linked to variations in import penetration and trade patterns," the study states.

Chinese exports to the euro area increased by 60 percent after the pandemic

Since China joined the World Trade Organisation in 2001, its exports to the Eurozone have increased significantly. Despite stabilising in the 2010-20 decade, these increased by 60 percent after the pandemic. The Chinese share of Eurozone goods imports increased by two percentage points to 15.6 percent in 2024.

Imports from China have increased significantly in some sectors. The automotive and chemical sectors saw the largest increases in imports from China, 150 percent and 140 percent respectively, over the past five years. Increased Chinese competition has direct implications for Eurozone labour markets. Sectors particularly exposed to Chinese competition, those where imports from China have increased significantly, employed 29 million workers. This represented about 27 percent of total Eurozone employment in 2024. Based on 2024 data, the manufacturing sector accounts for a significant share, employing 24 million workers. It is particularly exposed to trade shocks and Chinese import penetration.

Eurozone businesses must adapt to an increasingly competitive global environment

Labour demand has fallen most in sectors where exposure to China increased most between 2019 and 2024. In detail, the study states, the Eurozone labour demand has undergone major shocks, such as the pandemic and the energy crisis. Other dynamics in specific sectors (such as weak demand for cars in Europe) may also have had an impact.

According to the ECB study, current US trade policy and the imposition of tariffs are likely to increase Chinese competition. Following the Trump administration’s announcements of increased US tariffs on Chinese goods, Chinese exporters may expand or seek new markets elsewhere and increasingly redirect trade towards Europe. This trade diversion could amplify the penetration of imports from China into Eurozone markets, challenging manufacturers (Gunnella et al., 2025). While Eurozone businesses may gain some competitive advantage in US markets over China because US tariffs on China are relatively higher, this is unlikely to offset losses in the domestic market.

Overall, the ECB stresses, the growing competitiveness of Chinese exports poses significant challenges for Eurozone labour markets. Although the impact is currently concentrated in sectors such as automotive and chemicals, the broader implications could extend to almost one-third of Eurozone employment. Trade diversion from the US, combined with China’s growing competitiveness in high value-added sectors, suggests that Eurozone businesses must adapt to an increasingly competitive global environment. Trade shocks can cause short-term disruptions and shifts in jobs between sectors.

However, in the long term, "total employment may not change much because the economy adjusts through wage variations and the movement of workers between sectors. Nevertheless, challenges such as labour market inefficiencies, adjustment costs and government policies could cause temporary disruptions before the new equilibrium is reached," warns the ECB.

This article was translated to English using an AI tool.

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