Published as part of the ECB Economic Bulletin, Issue 5/2025.
Increased competition from China across global export markets has affected the euro area labour market in recent years. As China has moved up the value chain, its exports have increasingly challenged European firms both domestically and in third-country markets (Banin et al., 2025). This competition is no longer confined to low-cost goods; it extends to high value-added sectors, such as vehicles and specialised machinery (Al-Haschimi et al., 2024). Elevated US tariffs on China may further increase competition for euro area producers if Chinese exporters expand or seek new markets in Europe. This box analyses the implications of increased Chinese competition for euro area employment by exploring how shifts in labour demand are linked to changes in import penetration and trade patterns.
We can assess import penetration by measuring the rise in Chinese imports per worker in European markets, defined as the ratio of euro area imports from China to total euro area employment. This metric highlights the growing presence of Chinese goods in euro area markets (Chart A). Since China’s accession to the World Trade Organization in 2001, its exports to the euro area have increased substantially: despite stabilising in the decade 2010-20, these surged by 60% after the pandemic, with China’s share of euro area goods imports increasing by two percentage points to 15.6% in 2024.
Chart A
Euro area imports from China per worker and the share of euro area manufacturing employment
(left-hand scale: percentage; right-hand scale: thousands of euro)
Sources: Eurostat and Trade Data Monitor.
Imports from China have risen significantly in certain sectors. The vehicle and chemicals sectors have experienced the largest increases in imports from China – rising by 150% and 140% respectively over the past five years (Chart B).[1] Other sectors have also seen significant growth in Chinese imports, for instance paper and printing and electrical equipment each saw an increase of 85%. These statistics emphasise the breadth of China’s import penetration across a wide range of industries, from traditional manufacturing to advanced technology.
Chart B
Employment exposure to changes in Chinese euro area imports
(percentage)
Sources: Eurostat and Trade Data Monitor.
Notes: The colours in this chart show changes to euro area imports from China between 2019 and 2024. The latest observations on employment shares are for 2022.
The rise in Chinese competition has direct implications for euro area labour markets. Sectors particularly exposed to China’s competition, i.e. sectors where imports from China have increased substantially, employed 29 million workers, accounting for around 27% of total employment in the euro area in 2024. Based on data from that year, the manufacturing sector represents a significant share, as it employs 24 million workers and it is particularly exposed to trade shocks and Chinese import penetration.[2] While the sectors most exposed to increased Chinese import penetration – such as vehicles and chemicals – are not the largest employers, these are critical to the euro area economy. The vehicle sector accounts for only 1% of total euro area employment, but it contributes nearly 10% of the manufacturing sector’s real value added and slightly below 2% of euro area GDP. When inter-sectoral linkages are considered, the relevance of the vehicle sector almost doubles, demonstrating its vital importance to the economy (De Santis et al., 2024). Together, the vehicle and chemical sectors employ four million workers, which is 2.5% of total euro area employment. Other exposed sectors, including paper, electrical equipment and plastics, account for an additional three million workers, or 1.7% of total employment.
Labour demand has decreased more in sectors where exposure to China has increased the most between 2019 and 2024. Using earnings calls data and the methodology of Foroni and Schroeder (2025), we have built a sectoral indicator of labour demand tightness based on a list of keywords that reference the pressures firms face from unmet labour demand. In the euro area, labour demand has faced major shocks, such as the pandemic and the energy crisis, and other dynamics in specific sectors (like weak demand for cars in Europe) may have also had an impact. Chart C highlights the link between changes to euro area labour demand and changes in imports from China. Sectors facing greater competition from China have experienced larger declines in published job vacancies – a signal of weaker labour demand. Between 2019 and 2024 labour demand in the vehicles sector fell by 55%, while the decline in the chemicals industry is estimated at 95%. In contrast, sectors with lower exposure to Chinese competition saw, on average, relatively stable labour demand during the same period.
Chart C
Chinese import dynamics and changes to euro area labour demand by sector
(percentage)
Sources: NL Analytics, Trade Data Monitor and ECB staff calculations.
Notes: Labour demand is measured using earnings calls data (Foroni and Schroeder, 2025). The changes shown are for the period 2019-24.
An increase in imports per worker in a sector leads to a corresponding loss in employment within that sector. Applying the analysis of Autor et al. (2013) to euro area countries, Chart D shows the impact on euro area countries’ sectoral employment rates in 2022 of an increase in imports from China per worker every year between 2010 and 2021.[3] The long time span allows for a significant impact on employment rates that builds up gradually, as the effects of lay-offs and the workforce adapting to the economic situation can take time to fully develop. Notably, the effects are larger when considering changes since 2010, and gradually diminishing when examining shorter time spans. For instance, a €1,000 increase in imports from China per worker in a sector between 2015 and 2022 leads to a 0.1 percentage point fall in the employment rate in this sector over the same period. This represents around 240,000 jobs at the euro area level that have either ceased to exist or been reallocated to less exposed sectors.
Chart D
The effect of an increase in imports from China per worker per year on sectoral euro area employment rate in 2022
(cumulative change in employment rate in 2022 relative to each year on the x-axis in percentage points)
Sources: Eurostat and ECB staff calculations.
Notes: The chart shows the estimated β of several cross-section regressions using the following econometric specification: =)/ ++ with being the employment rate in sector s, country i in 2022 and the imports from China of country i in 2022 of goods produced by sector s. It is weighted by the employment L in the same sector and country. x determines the lag of the regression, that varies between 1 and 12 (corresponding to the years 2010 to 2021). Furthermore, following Autor et al. (2013), we have instrumented )/ by )/ which is the corresponding imports from China to countries u similar to the euro area, namely Australia, Canada, Iceland, Israel, Japan, New Zealand, Norway and South Korea. These countries are affected by a similar shock from increased Chinese imports, but this shock does not affect euro area employment directly. We use lagged employment, because contemporaneous employment can be affected by anticipated China trade. The database is a euro area country panel categorised by NACE2 sector, between 2010 and 2022. The blue shaded band represents a 90% confidence interval.
The current US trade policy and the imposition of tariffs are likely to increase Chinese competition. Following the Trump Administration’s announcements of higher US tariffs on Chinese goods, Chinese exporters may expand or seek new markets elsewhere and increasingly redirect trade towards Europe. This trade diversion may amplify the penetration of imports from China into euro area markets, challenging producers (Gunnella et al., 2025). While euro area firms may gain some competitive advantage in US markets relative to China because US tariffs on China are comparatively higher, this is unlikely to offset losses in the domestic market.[4]
All in all, the rising competitiveness of Chinese exports poses significant challenges for euro area labour markets. While at the moment the impact is concentrated in sectors such as vehicles and chemicals, the broader implications might extend to nearly one-third of euro area employment. Trade diversion from the United States, combined with China’s increasing competitiveness in high value-added industries, suggests that euro area firms must adapt to an increasingly competitive global environment. Trade shocks can cause short-term disruptions and shifts in jobs between sectors. However, in the long run, total employment may not change much because the economy adjusts through wage changes and workers moving between industries. Nevertheless, challenges like job market inefficiencies, costs of adjustment and government policies might cause temporary disruptions before the new equilibrium is reached.
References
Al-Haschimi, A., Emter, L., Gunnella, V., Ordoñez Martínez, I., Schuler, T. and Spital, T. (2024), “Why competition with China is getting tougher than ever”, The ECB Blog, ECB, 3 September.
Autor, D., Dorn, D. and Hanson, G. (2013), “The China Syndrome: Local Labor Market Effects of Import Competition in the United States”, American Economic Review, Vol. 103, No 6, October, pp. 2121-68.
Banin, M., Di Nino, V., Lebastard, L., Lecourt, N. and Schaefer, S. (2025), “Have euro area exports missed the tech train?”, Economic Bulletin, Issue 2, ECB.
De Santis, R.A., Di Nino, V., Furbach, N., Neumann, U. and Neves, P. (2024), “Will the euro area car sector recover?”, Economic Bulletin, Issue 4, ECB.
Foroni, C. and Schroeder, C. (2025), “Using corporate earnings calls to forecast euro area labour demand”, Economic Bulletin, Issue 2, ECB.
Gunnella, V., Stamato, G. and Kobayashi, A. (2025), “The implications of US-China trade tensions for the euro area – lessons from the tariffs imposed by the first Trump Administration”, Economic Bulletin, Issue 3, ECB.
Several European companies in the vehicle sector, and to a lesser extent the chemical sector, have factories and joint ventures in China to serve the domestic market – however, these also serve the rest of the world, including the euro area.
The remaining five million workers are employed in the agriculture, mining and energy sectors.
For example, the estimate shown for 2010 is the effect that a €1,000 sectoral increase in imports from China per worker between 2010 and 2022 has on the change in the corresponding sectoral employment rate for the same period.
The potential gains would likely be very small because of the different composition of exports to the United States from the euro area and China (Gunnella et al., 2025).