China’s strengthening export momentum is emerging as a significant threat to Europe’s economic outlook, with Goldman Sachs cautioning that major EU economies could face notable GDP losses as Beijing doubles down on an export-led recovery strategy. The investment bank has cut its eurozone growth forecasts, warning that Europe is increasingly exposed to rising global trade competition at a time of limited policy flexibility.
Giovanni Pierdomenico, an economist at Goldman Sachs, said the euro area is “particularly exposed” to the impact of increased Chinese goods supply, which risks widening the region’s growing trade deficit with China and undermining its already weakened competitive position. The bank estimates that stronger Chinese export competition will reduce eurozone GDP by about 0.5% by the end of 2029.
Germany is projected to face the heaviest hit, with real GDP expected to be 0.9% lower over the next four years due to pressure from Chinese exports. Italy is forecast to see a 0.6% impact, while France and Spain are each expected to register declines of around 0.4%.
Goldman analysts point to a sharp shift in global market dynamics: in the past five years, eurozone exporters have lost as much as four percentage points of market share to Chinese firms across major global markets. The bank estimates that for every one-dollar increase in Chinese exports, European exports typically fall between twenty and thirty cents, illustrating the scale of substitution taking place. This trend, analysts say, is steadily eroding Europe’s competitive edge.
European policymakers have announced a series of measures aimed at strengthening strategic resilience, including the Critical Raw Materials Act and the AI Continent Action Plan. But Goldman Sachs remains doubtful that these initiatives will be enough to counter China’s export dominance. Analyst Filippo Taddei notes that the EU’s response is constrained by structural vulnerabilities — particularly its heavy reliance on China for key components and raw materials.
Goldman warns that while selective action against certain Chinese products is possible, broader restrictions could disrupt supply chains central to Europe’s industrial activity. At the same time, the bank highlights that many EU programmes intended to shore up competitiveness remain underfunded relative to their ambitions.
Defence is the only sector where Europe has committed substantial financial resources, with the Readiness 2030 programme backed by €150 billion in loans under the Security Action for Europe scheme. Even this effort, however, relies on Chinese supplies of rare earth elements essential for advanced military systems.
The bank concludes that without a more unified and assertive industrial strategy, Europe risks losing further ground in global markets it once dominated. Policymakers now face difficult decisions over how to reinforce Europe’s industrial base while managing its dependence on Chinese inputs — and how long the region can rely on fiscal support and consumer strength to cushion its economy against mounting external pressures.
