Germany Considers Broad Tariffs as China’s Economic Pressure on Europe Intensifies
Last weekend, the historic German battery manufacturer VARTA, known in Israel for vehicle batteries, filed for bankruptcy after 138 years in business. The collapse followed a major deal with Apple that was abruptly canceled when Apple shifted production to China to cut costs. This event highlights a broader economic challenge Europe faces, dubbed "Chinese Shock 2.0," where China is flooding the market not only with cheap goods but also with advanced technology products such as batteries, solar panels, electric vehicles, and industrial robots.
China’s competitive pricing and comprehensive supply chains are severely impacting German manufacturers, especially in key sectors like automotive, machinery, chemicals, and aerospace. Last year, around 24,000 German companies went bankrupt, with insolvencies in early 2026 reaching a two-decade high, according to the Halle Institute for Economic Research. The combination of energy crises, geopolitical tensions, and China’s advanced manufacturing capabilities has pushed Germany’s economy into a critical state.
China dominates the electric vehicle battery market, controlling fuel cell technology and rare metals essential to European producers. European automakers must even submit production plans to Chinese authorities, giving China strategic insight into their operations. Meanwhile, the U.S. has imposed heavy tariffs on Chinese goods, redirecting exports to the European Union, which has been slow to respond. The EU’s partial measures, such as a 10% tariff on electric cars, have been circumvented by China’s shift to exporting cheaper hybrid vehicles.
Germany and the EU are now preparing a comprehensive response package to be voted on after the summer recess. Proposed measures include sweeping tariffs on Chinese imports, inspired by U.S. policies, and mapping critical dependencies where Chinese industry relies on German companies, particularly in semiconductors, automotive production, pharmaceuticals, and chemicals. This new approach, led by Chancellor Olaf Scholz, aims to leverage Europe’s remaining industrial strengths against China’s dominance.
France is pushing for tougher policies, including subsidies for European-made vehicles and penalties for non-EU manufacturers, as part of a broader EU strategy to counter China’s market flood. The European Commission plans to present this package in the fall, seeking greater market access for European firms in China, stronger intellectual property protections, and freer supply of rare metals. Scholz has also criticized China for artificially devaluing its currency to boost exports.
Despite these efforts, Germany’s export decline since 2023, amounting to nearly 140 billion euros annually, signals a long-term trend of losing market share to China. The German central bank warns that Germany is losing ground in key trade partners where China is gaining. The evolving economic landscape demands urgent and coordinated action from Europe to protect its industrial base and economic sovereignty.
