Europe’s Second China Shock: Green Dreams, Red Factories
Europe gets cheaper consumer goods and faster decarbonization. German factory workers get pink slips. The economists writing about blessings aren't in Wolfsburg.
35,000 jobs.
That’s the number Volkswagen executives announced in late 2025. Thirty-five thousand German workers, many of them second or third generation on the factory floor, told their livelihoods would be eliminated by 2030. Some of the plants might close entirely.
The executives delivered the news in Wolfsburg, the company town that VW built, where nearly everyone’s fate is tied to the automaker. The journalists nodded. The stock ticked up slightly. Across the North Sea, a BYD factory in Hungary was preparing to manufacture electric vehicles that would flood into Europe at prices no German worker could match.
While the announcements were being made, economists in Frankfurt were writing blog posts about the blessing in disguise.
The phrase appears repeatedly in the research. Europe’s Second China Shock, they argue, is solving the continent’s inflation problem. Cheap Chinese imports are dragging down prices. The European Central Bank can cut interest rates. Consumers will benefit. The green transition will accelerate. The macroeconomic picture is, they insist, quite positive.
Tell that to the workers in Wolfsburg.
Tell that to the 4,100 employees at Siemens Energy’s wind division who learned in 2025 their jobs were being eliminated. The company cited massive losses and competition from Chinese turbine makers offering prices roughly 50% lower. These weren’t low-skill assembly jobs. These were engineers and technicians building wind turbines, the technology Europe claimed would be the future of energy and employment.
The future arrived. It was made in China.
Tell it to the steelworkers at Thyssenkrupp’s Gelsenkirchen plant, where production was halted in late 2025. The official reason: low-priced Chinese imports diverted from the United States after Trump’s tariff wall went up. The hydraulic system of global trade doesn’t eliminate overcapacity. It redirects it. When America closed its market, the pressure exploded into Europe. The blast hit Gelsenkirchen.
These communities were already struggling. Germany’s industrial heartland has been slowly bleeding for years. Energy costs are brutal. Bureaucracy is suffocating. Investment has stalled. The promise was always that the green transition would save them. Solar panels, wind turbines, electric vehicles. Europe would lead the world in clean technology and manufacturing would thrive again.
That promise is being broken in real time.
The green transition is happening. That part is true. Solar deployment is ahead of schedule. Battery storage is becoming economically viable. Electric vehicles are finally reaching mass-market prices. But none of it is being built in Europe. The hardware is Chinese. The batteries are Chinese. The supply chains run through Shenzhen and Ningde, not Stuttgart and Duisburg.
Europe is getting its green transition. European workers are getting discarded.
The cruelty of the blessing framing is staggering. Yes, consumers benefit from cheaper electric vehicles. Yes, inflation comes down when Chinese goods flood the market. Yes, the climate benefits when solar panels cost 40% less than they did two years ago. But the economists celebrating these macro outcomes are not the ones losing their jobs. They’re not watching their towns hollow out. They’re not explaining to their children why the factory is closing.
The disconnect is obscene.
French President Emmanuel Macron warns that Europe is becoming an industrial vassal without aggressive protectionism. He’s not wrong about the diagnosis. But France can afford to posture. Its automakers are less exposed to the Chinese market than Germany’s. Paris won’t bear the immediate cost of a trade war.
Germany is paralyzed. Chancellor Olaf Scholz and the German auto lobby opposed EU tariffs on Chinese electric vehicles. Their reasoning is coldly rational: German carmakers still generate 30 to 40% of their profits in China. Retaliation would destroy what remains of their business model. So Germany argues for accommodation. The factories close anyway.
Meanwhile, Hungary’s Viktor Orbán actively courts the investment that terrifies Western Europe. BYD’s first European car factory. CATL’s massive battery gigafactories. Orbán sees Chinese capital as Hungary’s path to reindustrialization. He’s not entirely wrong. Hungary is getting new factories and new jobs while Germany sheds both. But Hungarian workers are being integrated into a supply chain designed in Beijing, financed by the Chinese state, and utterly dependent on decisions made thousands of miles away.
This isn’t sovereignty. It’s a different form of vassalage.
The workers caught in this vice have no good options. Protectionism might save some jobs in the short term, but it would raise prices for consumers and slow decarbonization. The political costs would be enormous. Free trade accelerates the green transition and lowers inflation, but it liquidates the industrial base. There is no path that doesn’t involve mass displacement and community destruction.
The choice was never really theirs to make.
BASF, the world’s largest chemical company, is cutting European capacity while pouring €10 billion into a new facility in Zhanjiang, China. The CEO has argued that without profits from China, the European transition is unaffordable. The logic is impeccable. The human cost is invisible in the quarterly earnings call.
Stellantis has partnered with Chinese EV maker Leapmotor to sell Chinese-engineered vehicles through European dealerships. When the continent’s biggest automakers openly admit they cannot compete without Chinese technology, the war is over. The workers already know this. Management is just catching up.
The macroeconomists are technically correct. Cheap Chinese goods are helping solve Europe’s inflation problem. Interest rate cuts may boost services and housing. The green transition is accelerating. These are real benefits. They will help millions of European households.
But those households include the workers being destroyed.
The industrial base that underwrote European prosperity for generations is being liquidated. Not because of incompetence. Not because of a temporary shock. Because of structural decisions made years ago when China moved up the value chain and Europe failed to respond. The consequences are landing now, in Wolfsburg and Gelsenkirchen and across Germany’s industrial towns.
Thirty-five thousand jobs at Volkswagen. Four thousand at Siemens Energy. An unknown number at Thyssenkrupp, at BASF, at suppliers and subcontractors downstream. The European automotive sector employs millions. How many of those jobs survive the next five years?
The shock isn’t coming. It’s already here.
The workers see it. Their union reps see it. The local politicians see it. The economists in Frankfurt writing about the blessing in disguise see it too. They just think the trade-off is worth it.
References:
China’s record $1 trillion-plus trade surplus shows the renminbi should be allowed to appreciate
EU trade relations with China. Facts, figures and latest developments.
How German Industry can survive the second China shock
Made in China 2025: Evaluating China’s Performance
EU Tariff Showdown: Can Germany and Hungary Avert a Full-Scale Trade War with China?
Powerful piece on the structural dilemma Europe's facing. The VW layoffs and the macroeconomists calling it a 'blessing' really captures how divorced policy analysis can get from ground reality. One thng that stands out is the point about Hungary's new factories, it's not exactly sovereignty when the entire supply chain decision-making sits in Shenzhen and state subsidies dictate every margin.