According to senior policy fellow Tobias Gehrke, China may no longer need to aggressively sanction Europe to shape European policy. Instead, Beijing may be succeeding through something quieter and potentially more effective: fear. European leaders, businesses, and institutions increasingly appear to be hesitating before taking actions that might provoke Chinese retaliation, creating what Gehrke describes as a chilling effect on policymaking. In this view, China often wins not when it punishes Europe, but when Europe punishes itself through hesitation and inaction.
At the center of this concern is a simple but uncomfortable question: Is Europe becoming too afraid to protect itself?
China’s New Form of Economic Pressure
China’s pressure campaign against Europe does not always look like traditional sanctions. Instead of immediately slamming tariffs on European exports or openly declaring trade punishment, Beijing increasingly relies on legal threats, supply chain leverage, and signals that retaliation could come if Europe moves too aggressively.
In April alone, China enacted new industrial and supply chain security regulations instructing Chinese firms not to comply with EU investigations or sanctions. Beijing also cut off dual-use supplies to seven European defense contractors over Taiwan and issued explicit warnings concerning proposed European legislation such as the Industrial Accelerator Act and revisions to the Cybersecurity Act. Tobias Gehrke argues these moves create political pressure before any formal punishment even begins.
China’s message appears clear: challenge Beijing’s economic interests and consequences may follow.
Yet Gehrke’s larger point is that China may not even need to act. If European governments avoid stronger industrial policies, trade defenses, or supply chain protections simply because they fear retaliation, then Beijing has already achieved its objective.
“The trade data,” Gehrke writes, “misses the political mechanism at play.” The real impact is not always measured in tariffs or blocked exports, but in political caution. European policymakers may quietly abandon policies that would reduce dependence on China because they fear triggering a confrontation.
Europe’s Self-Sanctioning Problem
Europe officially recognizes economic coercion as a threat. The EU’s Anti-Coercion Instrument, which entered into force in December 2023, explicitly defines economic coercion as a foreign country pressuring the EU or a member state through threats to trade or investment to force political decisions. The framework allows Brussels to investigate coercion and eventually respond with trade restrictions, procurement limits, export controls, or financial penalties if necessary.
On paper, Europe appears prepared.
In practice, however, Europe’s response has often been cautious, procedural, and slow moving. Under EU rules, investigations, consultations, council determinations, and negotiations can stretch over months. Meanwhile, China’s pressure operates in real time.
This raises a troubling possibility. Europe has created bureaucratic defenses against coercion while struggling to demonstrate political willingness to aggressively use them.
Instead of bold industrial protection, Europe’s debate has frequently centered on smaller fixes like deregulation or reducing red tape. German Chancellor Friedrich Merz and Italian Prime Minister Giorgia Meloni, for example, have emphasized competitiveness reforms rather than broader systemic protections against Chinese industrial pressure. Gehrke argues this hesitation reflects fear that stronger actions may trigger retaliation.
The result is a Europe that risks sanctioning itself by choosing caution over confrontation.
The Growing Trade Imbalance
This hesitation comes at a time when Europe’s trade relationship with China is becoming increasingly lopsided.
China posted a record trade surplus of €1.05 trillion in 2025, while EU-China trade imbalances continued to widen. China’s surplus with Germany alone doubled from $12 billion to $25 billion between 2024 and 2025 as imports surged and exports weakened. Chinese exports to Germany reached $118 billion while German exports to China fell to $93 billion.
Across Europe, economists warn that trade deficits with China have worsened significantly. One study cited in the material argues Europe’s trade deficit with China roughly doubled compared to the average seen between 2015 and 2019, driven partly by cost differentials and exchange rate dynamics that heavily favor Chinese exports.
Europe faces a painful reality. Procurement managers and manufacturers often choose Chinese suppliers because the economics are hard to ignore.
Oliver Richtberg of Europe’s machinery manufacturing sector described the challenge bluntly: if a Chinese supplier offers a product at “95% of the quality” but “30-50% cheaper,” businesses will naturally choose it. “This is what is also hurting us,” he warned. “We cannot accept this any more because it is just unfair.”
What Is China Shock 2.0?
Many analysts now warn Europe is entering what some call “China Shock 2.0.”
The original China shock described what happened after China entered the World Trade Organization and flooded global markets with low-cost goods. In the United States, soaring imports displaced domestic industries and contributed to the loss of up to 2.5 million jobs.
The fear today is that Europe may face a second version of that disruption.
This time, however, the issue is not just finished products like electric vehicles. Jens Eskelund, president of the European Chamber of Commerce in Beijing, warns that the real concern is “the sheer volume of components being imported from China.” His warning is stark: “Europe is getting more dependent on China.”
Chinese parts are increasingly embedded in Europe’s industrial system, from pharmaceuticals and machinery to batteries, semiconductors, robotics, and green technologies. Analysts warn that low-priced imports could gradually make European production economically impossible, leaving Europe dependent on the same system that displaced its factories.
Germany offers an alarming example. About 250,000 industrial jobs have reportedly disappeared since 2019, with machinery and auto manufacturing suffering major losses. Some estimates suggest Germany is losing between 10,000 and 15,000 industrial jobs every month.
Andrew Small of the European Council on Foreign Relations believes Europe is still underestimating the scale of the challenge.
“All of the China shock dynamics are holding,” Small said, warning that “the tools used so far by the EU are not commensurate with the import levels.” He argues that China remains “massively underweight in the debate about what is happening in European industry.”
What Small appears to mean is straightforward. Europe is debating small fixes while confronting a structural challenge large enough to reshape entire industries.
Even when Europe acts, Beijing may simply slow or complicate the process. Small warned that China “doesn’t need to stop all the new countermeasures the EU has at its disposal, it just needs to snarl up the process with the aim of keeping their exports flowing.”
In other words, China may not need total victory. Delay, hesitation, and political paralysis may be enough.
A Bureaucracy Under Pressure
Europe now faces a difficult choice.
It can continue moving cautiously, relying on consultations, investigations, and gradual reforms while hoping market forces stabilize the imbalance. Or it can accept that the current approach may be too weak for the scale of the challenge.
The uncomfortable argument emerging from Gehrke’s work is that Europe may already be losing ground because it fears escalation more than dependence. If EU member states continue hesitating to impose stronger trade defenses, diversify supply chains, or aggressively protect strategic industries, the costs may continue to compound.
China may not need dramatic sanctions if Europe voluntarily avoids policies that might upset Beijing.
That possibility points to an even larger concern. If the EU bureaucracy cannot act quickly or forcefully enough to protect member states from economic pressure, then Europe’s greatest vulnerability may not simply be China’s power. It may be Europe’s inability to respond to it.
https://ecfr.eu/article/how-chinas-silent-coercion-has-europe-sanctioning-itself
