Episode summary
Inside the Second China Shock Sweeping Across Europe
Wall Street Week
· · Guests: David Autor, Stephanie Flanders
Summary
Germany’s auto supply chain is under pressure as Chinese competition, slowing demand, and the shift to electric vehicles squeeze manufacturers around Schweinfurt and across Bavaria. A local supplier, the Jopp Group, has cut plants and jobs after customer programs were postponed and volumes fell, illustrating how quickly the strain is reaching family-owned industrial firms.
The episode argues that this looks like a new version of the “China shock,” but with important differences from the U.S. experience after 2001. The economist discussed the earlier shock as a rapid import surge that hit manufacturing-heavy U.S. regions especially hard, while the analyst said Europe now faces a broader challenge because China has moved up the value chain and is exporting more advanced products, including cars and other high-tech goods.
The second half of the discussion focuses on whether Europe is simply absorbing redirected Chinese exports or seeing a more complicated shift. The analyst said the data suggest China has offset U.S. tariffs by selling more to other regions, but not necessarily the same goods to the same places. At the same time, cheaper Chinese imports may be helping reduce inflation in Europe, which could give the European Central Bank more room to cut rates.
Key takeaways
- The host shows how Germany’s auto sector is already shedding jobs, with manufacturing employment down and the Jopp Group cutting about 500 workers.
- The economist argues the original U.S. China shock caused nearly 60% of U.S. manufacturing job losses between 2001 and 2019.
- The economist says the U.S. made two mistakes then: it allowed the shock to hit too fast and provided too little support for adjustment.
- The analyst says China’s current export surge is broader and more complex than a simple rerouting of goods from the U.S. to Europe.
- The host says lower-priced Chinese imports may be helping pull down inflation in parts of Europe, potentially easing pressure on the ECB.
Notable quotes
“-China is really a challenge for the German automotive landscape at the moment”
“-I think that the U.S. did two things wrong. First, we just let it rip”
“-Europe has been one of those markets and Chinese exports to Europe are growing very rapidly”
“-We are seeing that China has successfully offset the impact of U.S. tariffs by trading more with other countries”
“I think it's actually in many ways more challenging now than it was 20 years ago because China has moved so far up the value chain”
How the episode opens
About two hours outside Frankfurt lies the town of Schweinfurt. Dating back to 791, it's one of the oldest towns in Bavaria. Today, Schweinfurt is part of an auto industry that's at the center of Germany's modern industrial might.
-The auto industry is really the backbone of Germany. -German car makers are among the most famous in the world. Mercedes, BMW, Volkswagen.
But supporting the iconic brands is a vast network of parts manufacturers. One of them is the Jopp Group, based near Schweinfurt. -So we are the main machining plant here of our headquarters.
Westin: Its CEO is Martin Buchs. -We are an automotive supplier, mainly for maybe 80% of our business. We're supplying directly to the OEMs, the vehicle manufacturers, and supplying to the tier one suppliers that supply to the vehicle manufacturers, like Audi, Mercedes, Volkswagen, Porsche.
So you can find our parts in all of these vehicles. Westin: But the German auto industry is facing stiff headwinds. Germany employed over 800,000 auto workers in 2018, a number that fell to just over 720,000 last year.
And it isn't just auto manufacturing that's down. The German manufacturing sector overall employed around 5.5 million people at the end of September 2025. That's 2% less than a year earlier.
-China is really a challenge for the German automotive landscape at the moment. With the rise of the battery electric vehicle, which has gained now 17% market share here in Europe as well, access to battery technology is much more difficult for German OEMs. Access to raw material is much more difficult.
And the Chinese OEMs, there has been a lot of new OEMs actually coming up. I think it's about 100 in China. So competition in China is very tough, actually.
And the export of components and vehicles from Germany to China has decreased significantly.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- second china shock
- china exports
- european trade
- auto manufacturing headwinds
- wto and manufacturing decline
Watch the episode
Watch “Inside the Second China Shock Sweeping Across Europe” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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