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European economies could be left bearing the brunt of intensifying global trade competition as Beijing renews its push into an export-led recovery.
That’s the stark warning from a series of Goldman Sachs reports, as the investment bank cuts its European growth forecasts in response to China’s renewed export drive.
“The euro area is particularly exposed to the negative effects of increased Chinese goods supply, which threatens to widen the euro area bilateral goods trade deficit with China and to challenge its already weakened international competitive position,” said Goldman Sachs economist Giovanni Pierdomenico.
“We expect that stronger Chinese export competition will lower euro area GDP by around 0.5% by end-2029,” he added.
According to the bank’s estimates, Germany faces the largest drag, with real gross domestic product expected to be about 0.9% lower over the next four years because of this pressure. It forecasts that Italy will see a 0.6% hit and France and Spain around 0.4% each.
What makes this shift particularly uncomfortable for Europe is the scale of substitution between Chinese and European goods in global markets.
Goldman Sachs estimates that, over the past five years, eurozone exports have lost up to four percentage points of market share to Chinese exporters in major global markets.
For every one-dollar increase in Chinese exports, European exports have typically declined by between twenty and thirty cents.
This substitution effect is eroding Europe’s competitive edge.
Can Europe counter China’s export threat?
While the European Union has launched several initiatives to strengthen economic resilience — most notably the Critical Raw Materials Act and the AI Continent Action Plan— Goldman Sachs remains sceptical of their effectiveness.
The bank’s analyst Filippo Taddei argues that Europe’s ability to respond is hampered by its own vulnerabilities.
Goldman notes that Europe’s options are limited by its reliance on China for essential inputs.
“While targeted action against Chinese products is possible… any broader initiative to limit Chinese supply in European markets will need to be weighed against Europe’s reliance on China for several critical raw materials,” analysts caution.
“Despite these programmes, the EU continues to face structural dependence on foreign suppliers.”
The bank also warns that “available funding remains insufficient relative to the stated ambitions,” raising doubts over the EU’s capacity to restore its export competitiveness against China.
Too timid a response from Brussels, experts argue, could accelerate the gradual erosion of Europe’s industrial base, as Chinese firms expand their grip on global markets.
But an overly aggressive stance — such as sweeping tariffs or broad import restrictions — could backfire by disrupting supply chains on which Europe remains heavily dependent.
A test of Europe’s industrial resolve
Goldman Sachs underlines that defence is the only major policy area in which Europe has put real money on the table. The bloc’s Readiness 2030 programme (ReArm Europe), backed by €150 billion in loans through the Security Action for Europe scheme, stands in sharp contrast with other initiatives that remain either underfunded or slow to gain traction.
Yet even here, Europe is far from self-reliant. Its defence ambitions still depend heavily on Chinese supplies of critical raw materials, particularly rare earth elements used in weapons systems, drones, sensors, and advanced electronics.
In the end, the message from Goldman’s analysts is unambiguous: Without a more unified and assertive industrial strategy, Europe risks losing ground in sectors it once led.
The economists stop short of calling for protectionism. But they leave policymakers with urgent questions: Can Europe achieve the industrial sovereignty it seeks? And how long can it rely on fiscal support and consumer resilience to shield itself from intensifying global headwinds?
