Brussels Economic Monitor 1/2026:"Made in Europe": Ready for Resilience?!
Europe’s Uphill Battle Against Deindustrialisation
Lesedauer: 3 Minuten
1/2026:"Made in Europe": Ready for Resilience?!
Europe’s Uphill Battle Against Deindustrialisation
The geoeconomic paradigm shift away from cooperative interdependencies toward the use of asymmetric dependencies as an economic weapon is clearly accelerating. It has become the defining feature of international competition and poses significant challenges for Europe as a whole. While China has come to dominate manufacturing in the cleantech sector and access to critical raw materials through mercantilist strategies, the U.S. is the technological leader in digital infrastructure and defence. And Europe in between, facing unfair trading practices, distortive overcapacities, and aggressive subsidy regimes. The result is a loss of industrial capacity and global market shares.
The European Commission is addressing this very issue, following a clear principle: "whenever European public money is used, it must contribute to European production and quality jobs". Against this backdrop, it has put forward the Industrial Accelerator Act (IAA) to boost industrial capacity-building and decarbonisation in three strategic sectors: energy-intensive industries, net-zero technologies and automotive supply chains.
Industrial policy support in China and the EU
in percent of GDP
Key topics covered in the Brussels Economic Monitor 1/2026:
- China spends ~3 times more on IP measures than the EU
- "Made in the U.S." subsidies crowded in private investment
- Export demand for EU cars has been hit by a double shock
- The yuan has depreciated significantly in recent years
- The EU now has FTAs with over 1/5 of the global economy
Take
In the face of unfair competition from abroad and a crumbling international trading system, preventing deindustrialisation in the EU will require a wide range of pragmatic policy measures. This should include offering incentives for foreign producers to establish manufacturing operations in Europe – for instance through well-designed (!) "Made in Europe" rules as proposed in the IAA – and encouraging them to cooperate with EU firms via joint ventures. Other measures should include urging China to allow its currency to appreciate and, as a last resort, a more strategic use of targeted trade-defence measures. Lowering trade barriers with like-minded countries is essential to provide European producers with the market size needed to scale up efficiently, while also enabling emerging economies, such as India, to build their own industrial capacities in the face of Chinese dominance. By supporting market-based actors grow and making it more difficult to gain market share through “beggar-thy-neighbour” policies, the EU has the potential to foster a more balanced, diversified and stable global economy – one that would ultimately benefit everyone.