EU policymakers are chasing phantom threats from China while ignoring actual economic problems at home. The bloc is embracing a 'China shock 2.0' narrative that exaggerates the impact of Chinese imports, despite evidence showing minimal displacement in key sectors.

European car imports tell a different story. Chinese passenger cars entering the EU rose from 750,000 in 2023 to just over 1 million in 2025, yet total EU car imports stayed flat. Meanwhile, German car purchases dropped 750,000 units since 2019, with another 1.5 million lost across the rest of Europe. Domestic demand weakness, not Chinese competition, drives the real challenge.

The EU's protectionist turn includes 'price undertakings' that force Chinese suppliers to raise prices, essentially subsidizing margins. This distracts from genuine risks like potential spyware in Chinese-made goods and dependency on critical raw materials. Martin Sandbu argues the bloc should welcome Chinese imports as productivity spurs while implementing targeted policies.

Instead of panic-driven measures, the EU needs stronger domestic demand policies: 'Buy European' procurement rules, carbon border fees on manufactured goods, and strict green tech timelines. These approaches would benefit consumers and competitive firms while addressing actual vulnerabilities rather than manufactured threats.