Future of Europe: Unlocking private capital crucial to funding the battle against climate change

“China’s whole growth model is where they repress consumption at home and recycle the savings via the levers of Chinese state led capitalism into investment,” Sander Tordoir, chief economist with the Centre for European Reform said.

“They've just redirected that model from the real estate bubble to manufacturing, and it's really focused on cars, solar panels, on the lots of other green good. It's creating massive trade imbalances globally,“ he added.

Tordoir said China’s overcapacity was being offset by the US buying a lot of European goods. If Donald Trump is re-elected though, the risk of a trade war between the US and China would increase.

“This sort of change, where trade barriers shoot up and overproduction on the Chinese side is running wild is a real headache for Europe. We're just a lot more open, and we're a lot more exposed. And our growth depends much more on exports than the US,” he said.

Tordoir is less concerned about the US Inflation Reduction Act (IRA), which provides major subsidies for domestic clean energy production but is “still open enough for European firms to benefit” from green demand in the US.