WASHINGTON - For eight years the United States has pursued an economic confrontation with China through steep tariffs on incoming Chinese merchandise.

Yet these measures have failed to weaken China's manufacturing capacity.

The world's second-largest economy now ships more goods globally than at any prior point, diverting flows away from the American tariff barrier toward receptive markets across Europe and other parts of Asia.

This redirection raises the prospect of a European version of the original China Shock, which eliminated hundreds of thousands of factory positions across the American Midwest in the 2000s and helped fuel political changes that twice elevated Donald Trump to the presidency.

Even amid U.S. sanctions, China recorded a record worldwide trade surplus last year totaling an extraordinary 1.2 trillion dollars.

French President Emmanuel Macron recently cautioned that Chinese exports are literally eliminating large segments of European industry and conceded that Europe was slow to recognize the issue.

European leaders now view the matter with clarity. China's trade practices rank high on the agenda as G7 leaders convene this week in Evian-les-Bains, France. French officials have signaled hopes for a coordinated strategy to address the China challenge emerging from the gathering.

One option involves the European Union and partner nations erecting elevated tariff barriers against Chinese imports. The EU currently applies relatively modest duties under World Trade Organization guidelines, although targeted products face steeper rates, such as up to 35 percent on electric vehicles.

China's export increase, unless curbed by its leadership, will trigger a wave of protectionist responses against Chinese goods worldwide, according to Maurice Obstfeld, senior fellow at the Peterson Institute for International Economics and former chief economist at the International Monetary Fund. This risk grows if disruptions tied to the Iran conflict continue and accelerate a global slowdown.

HSBC economist Taylor Wang cautioned this month that a China-EU trade dispute could imperil Chinese shipments, given Europe's substantial share of China's electric vehicle, solar panel, and lithium-ion battery exports.

Europeans also aim to convince Trump to cease applying punitive tariffs against U.S. allies such as the European Union and Canada, instead aligning with them to counter China.

The initial China Shock began around 2001 after China joined the World Trade Organization and secured low-tariff entry to major U.S. and European markets. Numerous American factories proved unable to match low-cost Chinese textiles, furniture, electronics, and other manufactured items.

Economists David Autor of the Massachusetts Institute of Technology, David Dorn of the University of Zurich, and Gordon Hanson, now at Harvard, determined that Chinese competition caused the loss of 2.4 million American jobs.

China Shock 2.0 unfolds in distinct ways.

During the first episode China was still developing as a global commerce participant. It now leads worldwide trade and manufacturing.

China represented just 4 percent of global goods exports in 2000. Its share has risen to 16 percent, the largest globally, rendering Beijing's trade decisions far more impactful.

China has advanced its offerings, exporting advanced items including electric vehicles and batteries, sophisticated machinery, software, and scientific instruments, placing it in direct rivalry with the wealthiest nations. Chinese exports now overlap with nearly 58 percent of shipments from the 21 eurozone countries, up from 46 percent in 2000, based on a recent paper by researchers at the Federal Reserve and the Federal Reserve Bank of St. Louis.

The second China shock features companies excelling across manufacturing exports from basic low-wage goods to advanced high-value sectors, said Cornell University economist Eswar Prasad. This directly affects advanced economies in their most critical areas, including high-tech fields such as electric vehicles and premium robotics that many nations had anticipated for manufacturing recovery.

Germany has faced significant pressure. German firms once profited from exports to China, but the dynamic has flipped: China now sells more to Germany than it purchases. German companies struggle against Chinese competitors in industrial machinery, construction equipment, automobiles, and chemicals, core elements of Germany's export-driven economy.

Partly due to Chinese competition, Germany's economy has stalled, contracting in 2023 and 2024 before expanding just 0.2 percent last year.

The United States faces less exposure than in the 2000s. Trump's tariffs have blocked substantial Chinese inflows. Shipments of Chinese goods to the United States fell 37 percent from January through April this year compared with the same period in 2025, according to U.S. Commerce Department data.

The United States holds a stronger position through domestic energy production, unlike the EU and Japan, alongside gains in productivity and artificial intelligence investment.

Despite Trump's tariffs and reduced U.S. sales, China benefits from strong demand for affordable electric vehicles and from AI-related spending that boosts purchases of Chinese electrical parts and data-center equipment.

Chinese exports to the 27-nation EU rose 16.4 percent in January through May versus a year earlier. For France this translated to a trade deficit with China reaching 5.3 billion dollars from 3.3 billion dollars the prior year, per Beijing customs figures.

Economists note that Chinese policies promote factory overproduction while discouraging consumer spending. State banks offer low returns to depositors yet provide inexpensive financing to state manufacturers. A limited social safety net encourages households to save rather than spend for future security.

Obstfeld explained that the approach partly seeks to sustain factory operations and employment. The outcome is excess domestic supply of manufactured items that must be exported, flooding global markets with low-priced Chinese products and endangering European and other factories.

Beijing has also promoted intense domestic competition among firms. The rest of the world is unprepared to match these top competitors, Autor and Hanson observed in a New York Times column last year.

China has often pledged to limit overproduction and boost consumer spending, as urged by the United States and others for decades. Such shifts would reduce export dependence, improve consumer welfare, and create larger markets for U.S. and European sales. The leadership has long identified this objective, Obstfeld said, yet progress remains limited.

Beijing has depended on the rest of the world to manage its overcapacity issue, said former U.S. trade negotiator Wendy Cutler, now senior vice president at the Asia Society Policy Institute. This unsustainable pattern may soon shift if the EU and others follow the U.S. example by restricting Chinese imports.