A flood of discounted Chinese imports is set to compound the economic dangers to Europe from US president Donald Trump’s tariffs, analysts warn, prompting Brussels to prepare measures to protect itself from a wave of cheap goods from Asia.
The direct impact of the US president’s 20 per cent levy on European Union (EU) products has sparked fears about the outlook for the bloc’s embattled manufacturers, who are already reeling from US levies on cars and steel.
But the severity of Mr Trump’s tariffs on economies such as China and Vietnam means Brussels is now on alert for an influx of Asian products like electrical goods and machine appliances being diverted into its own markets. The European Commission is preparing fresh emergency tariffs to respond, officials said, adding that they have stepped up surveillance of import flows.
“The immediate trade shock to Asia will probably reverberate back to Europe,” said Deutsche Bank’s chief Germany economist Robin Winkler. Chinese manufacturers will try to sell more of their products in Europe and elsewhere as they face “a formidable tariff wall in the US”.
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“We will have to take safeguard measures for more of our industries,” said a senior EU diplomat. “We are very concerned this will be another point of tension with China. I don’t expect that they are going to change their model of exporting overcapacity.”
The diplomat added that the EU had already put tariffs of up to 35 per cent on Chinese electric vehicles and that it was possible Brussels would have to go “much higher” on other products.
Policymakers around the world are contemplating an epochal upheaval in the global trading system after the Trump administration stunned US trading partners with the breadth and scale of the so-called reciprocal tariffs. The measures have taken the effective US tariff rate to a level not seen since 1909, according to Yale Budget Lab.
The EU is among the economies subject to a higher levy than the baseline 10 per cent tariff that the White House is applying to all its partners except Canada and Mexico.
But China will be clobbered even harder. Beijing faces a “reciprocal” 34 per cent tariff, on top of a 20 per cent levy already imposed by the president. The president also targeted countries through which Chinese companies have been diverting products to the US, among them Vietnam, which faces a new tariff of 46 per cent.
While analysts have speculated the punishing measures could drive the EU and China closer together, Brussels has for months been on edge given the risk that Chinese producers seek to boost market share via discounting given the forbidding barriers being erected by the US.
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Emmanuel Macron, the French president, warned that high levies on Asian countries could lead them to reroute their extra capacity to Europe with potentially “massive consequences” for the continent’s industries.
Andrzej Szczepaniak, an economist with Nomura, noted that the tariffs on China were “far greater than many – including us – had expected”. As a consequence, the risk of Chinese “goods dumping in Europe” would rise “materially”.
This could dent inflation, which in return could lead to more and faster cuts in interest rates by the European Central Bank.
The EU had to grapple with similar pressures during Trump’s first term. Brussels imposed 25 per cent “safeguard” tariffs on steel imports above a quota in 2018 after Trump applied similar measures. This was to prevent products from exporters such as China being diverted into the single market given US barriers.
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Officials said they were ready to act again. “We can close our markets due to an unexpected sudden influx of imports,” a senior Commission official said. “We have had that for steel for a while and we will see whether we need it for other sectors.”
However, the previous experience demonstrates how hard it is to combat China’s subsidised production.
EU steel output shrank in 2024, while other countries continued to expand production, according to the Organisation for Economic Co-operation and Development (OECD). Its latest figures found that global steel excess capacity is expected to grow from an estimated 602 million tonnes in 2024 to 721 million tonnes by 2027 – over five times the EU’s steel production.
“This unsustainable situation points to the shortcomings of the EU safeguards where the growing disconnection between imports allowed into the EU market and actual demand cannot be addressed,” said Axel Eggert, director general of the industry group Eurofer.
Clemens Fuest, president of the Ifo Institute, a German economic research think-tank, said the heavy toll Trump is planning to mete out on China will be a double whammy for Germany’s industry. The Asian country would try to sell more in other markets and hence put “additional pressure on German companies”, while it was likely to buy fewer German-made goods because of its own economic woes.
All this comes on top of the threat to manufacturers in Germany and elsewhere given the tough barriers they now face in the US. With Germany’s economy already stagnating, it is possible that the US tariffs could push the country back into contraction, added Mr Fuest.
“Europe’s worst economic nightmare just came true,” wrote ING’s Global Head of Macro Carsten Brzeski in a note to clients. – Copyright The Financial Times Limited 2025
