Marco Mensink keeps a souvenir above his desk in Brussels: a cross-section of electric cable. Mr Mensink runs Cefic, the lobby for Europe’s chemical companies, and his opening diagnosis of European industry is bleak — high energy prices and Chinese competition are forcing plant closures and job losses, and more consolidation is, in his word, ‘inevitable’. The cable, made by the Chinese giant Orient Cable, is his answer. The polymer insulating the wire comes from Bouruge International of Austria, and when he visits China, he says, industry bosses ask about the Austrian firm incessantly.
It is the only part of the cable they cannot make—yet.
The gloom is not invented. On September 21st Volkswagen said it would step up what it calls its restructuring plan; it is one of five European carmakers to issue a profit warning this year. In her state-of-the-union address on September 16th, Ursula von der Leyen, the European Commission’s president, warned that the trade deficit with China was at ‘a tipping point’.
Two things are squeezing Europe’s producers. One is energy: before subsidies, industrial electricity in France and Germany costs roughly twice what it does in America or China, and the wars in Ukraine and Iran have pushed prices higher. The other is China itself, whose factories have improved in quality while its home demand falters, sending surplus goods abroad. Donald Trump’s tariffs and import bans have made Europe the main target. China’s surplus in goods trade with the EU has more than doubled since 2019, to $420bn.
Cars have taken the worst of it. Chinese makers bring good cars to market faster and cheaper than Europe’s old champions; production in the EU is down 17% from its pre-covid level, unused capacity is being leased to Chinese rivals, and the industry provides 6% of EU jobs, according to official data. Less cash means less investment: a McKinsey analysis of six manufacturing industries found that in 2024 Europe received less than America and China in three of them — pharmaceuticals, electronics and chemicals — and the most in none, though that partly reflects European firms investing outside Europe to find cheaper energy and dodge tariffs.
And yet the continent-wide picture resists the funeral. Eric Heymann of Deutsche Bank points out that manufacturing’s share of total gross value added across the EU has sat at roughly 16% for years. Manufacturing employment has fallen about 2% since the first quarter of 2023, to 28m — but Germany alone accounts for four-fifths of that decline. Meanwhile the number of high-skilled jobs, engineers and technicians, has grown by 7% since the start of 2023. Employment in pharmaceuticals, aerospace and electronics has risen. The artificial-intelligence boom is filling the order books of Schneider Electric, Siemens and Prysmian, which make the gear that keeps data centres running, and arms-makers such as Rheinmetall and Leonardo are expanding with defence budgets.
The Chinese flood, examined closely, is narrower than the headlines. Simon Evenett of IMD calculates that since 2023 the volume of EU imports from China has grown only slightly faster than imports of the same goods from elsewhere: Europe is buying more from everybody. Looking at Germany’s top 100-odd imports from China, he found eleven where volumes had risen more than 25% while prices fell 10% since 2023 — electric vehicles, furniture and some chemicals among them. That is serious competition in eleven product lines, not the washing-away of a continent’s industry.
Some of the flood is actually useful. Of the 100 products contributing most to China’s global export growth since 2023, Mr Evenett finds, three-quarters of the growth came from components and intermediate goods such as EV batteries and robotic arms — cheaper inputs for European factories. A European Central Bank study of 2000 to 2022 found that sectors exposed to Chinese intermediate goods saw annual industrial-production growth 0.6 percentage points higher; those exposed to Chinese finished goods lost about a percentage point. The one trades pain, the other pays.
Companies are adjusting rather than waiting to be rescued. In Spain, helped by cheap solar power, European firms doubled annual investment between 2021 and 2025 against the previous five years. Morgan Stanley judges them ‘far more prepared’ for this winter than for the one in 2022, when the Ukraine war cut Russian gas; Solvay, the Belgian-French chemicals firm, and K+S, a German salt company, have hedged most of this year’s energy consumption.
They are also selling more than machines. EU manufacturers exported $460bn of services in 2024, up 21% in two years: maintenance contracts from the likes of Vestas and MTU Aero Engines, software folded into hardware by Siemens, subscriptions at Stellantis, whose service revenue it says grew 50-60% in a year (the carmaker’s largest shareholder, The Economist disclosed, part-owns its own parent company). Mrs von der Leyen has commissioned Siemens’ chairman, Jim Hagemann Snabe, to report on how AI can lift factory productivity, and Germany already fields the third-most industrial robots per employee in the world, behind Singapore and South Korea.
None of this repeals the price of French and German electricity, and none of it will save a carmaker that builds slowly what China builds fast. The honest summary is duller than the obituary and more useful: a few industries and one large country are in genuine trouble, the rest are muddling through, and the skills are not being lost — the high-skilled jobs are growing. The warning that matters comes attached to the one export China still has to buy. The polymer in that cable is the part they cannot make — yet. The Austrian firm will not be hard to copy forever, and Brussels has been told so, plainly, in writing.