China and the EU can, and should. "Polluter pays" should become the standard policy in international trade in numerous other ways, too.
https://ourworldindata.org/co2/country/china?country=USA~IND...
Buying less, but more expensive because of less polluting manufacturing methods is the answer. Economy will still keep going.
How so? If you are adding crushing taxes, then you're likely to see a downturn in production and consumption, which generally results in a weak or shrinking economy.
Let's take a hipothetical sweater as an example.
Now I buy a €20 sweater every 2 years. Let's say pollution tax would be €10. Suddenly it becomes €30 sweater and my €10/year sweater budget becomes €15/year. Instead, I could buy a nice sweater for €40 (+€10 tax) and wear it for 5 years. Now I'm back at original €10/year budget.
Economy wise, most of the chain is now just making nicer stuff that takes more resources. Aside from truck driver. Who is now moving twice as much sweaters. But €10 tax ideally would go to environment-improving projects and some drivers will make a living in those new sectors.
However, industry is without a doubt a massive resource user. Modern methods in manufacturing can save significant amounts of energy, water, and more. As China is the main producer in many instances, a change also needs to happen there to go from heavy polluting to less polluting methods.
That being said, tariffs and other mechanisms meant to force the pollution cost back onto producers really end up being paid largely by consumers anyway. You can't tax citizens of another country. So the tariff taxes citizens of your own country. The cost gets back to the producer country indirectly in that they sell less stuff, but every time the tax is paid it is paid inside the country imposing the tariff by citizens of that country. So it works more or less according to your suggested mechanism.