As Brussels prepares new measures to reduce strategic dependencies, tensions between the European Union and China are escalating over trade imbalances, industrial overcapacity and Beijing’s dominance in critical raw materials.
EU China trade tensions intensify as Brussels considers tougher trade measures
The dispute between Europe and China is entering a new phase. On 30 May, Beijing warned the European Union against introducing further trade restrictions, while EU institutions continued discussions on how to shield European industries from the effects of Chinese industrial overcapacity.
A day earlier, the European Commission had described the current trade and investment relationship between the two powers as “unsustainable”, signalling a more assertive European approach towards China.
The debate is expected to accelerate ahead of the EU leaders’ summit on 18 and 19 June. According to Reuters, proposals under consideration include requiring European companies to diversify supply chains and introducing new trade mechanisms to restrict Chinese access to the EU market in sectors such as chemicals, metals and clean energy technologies.
Europe compares dependence on China to a strategic vulnerability
According to Kaja Kallas, the EU’s effort to end excessive dependence on China should be viewed as the treatment of a “disease”. She suggested that the process could require a form of “chemotherapy”, acknowledging that the transition may prove painful.
These comments reflect an increasingly firm European stance towards Beijing. The issue of trade distortions and Chinese industrial overcapacity is also expected to feature prominently at the upcoming G7 summit in mid-June.
China responded with a warning, stating that if the EU were to introduce new unilateral trade instruments or discriminatory restrictions, Beijing would adopt effective countermeasures to protect its interests.
For some time, Ursula von der Leyen has advocated stronger action to protect European businesses. According to reports cited by POLITICO, von der Leyen and her chief of staff, Björn Seibert, are now backing a significantly tougher approach towards China, using growing economic concerns to strengthen their position within the European policy debate.
EU China trade tensions and Beijing’s dominance in critical raw materials
China maintains a dominant position in rare earth elements and other critical metals essential to sectors such as clean energy, advanced manufacturing and the automotive industry. Beijing controls at least 70% of global extraction or refining capacity for roughly half of the 34 raw materials that the EU classifies as critical.
In 2025, China reduced exports of critical raw materials to most countries. Rather than cutting supplies entirely and accelerating diversification efforts elsewhere, Beijing opted to maintain exports at lower, tightly controlled levels. Export restrictions have therefore become an important strategic deterrence tool.
European industry faces a more challenging environment than many competitors, particularly the United States, due to higher energy costs and stricter regulatory requirements. The calibrated use of critical raw materials restrictions during 2025 contributed to rising costs across Europe.
As a result, Stéphane Séjourné has argued for strengthening the EU’s trade defence instruments, including tariffs and import quotas, and applying them more systematically across sectors.
To address concerns over Chinese industrial overcapacity, the EU has proposed the new “Buy European” strategy and the RESourceEU initiative, aimed at accelerating the development of domestic critical mineral supply chains. Brussels has also announced new partnerships with resource-rich countries to diversify supply sources.
Germany reassesses its position on China
Attitudes towards China are also shifting among EU member states. Germany has traditionally been cautious about measures that could trigger Chinese retaliation and disrupt its industrial supply chains.
However, growing imports from China are increasingly challenging the competitiveness of Germany’s manufacturing sector, historically one of Europe’s strongest industrial pillars. These pressures are contributing to a gradual weakening of Berlin’s long-standing resistance to a tougher position on Beijing.
How Europe plans to reduce China’s leverage over critical raw materials
According to an analysis by the European Union Institute for Security Studies, current diversification efforts by the United States, Japan and especially Europe will not be sufficient to replace either the volume or the diversity of critical raw materials and related components supplied by China during the next decade.
The report argues that Europe’s dependence on Chinese critical raw materials represents a strategic vulnerability affecting both energy security and political autonomy. Without a much faster acceleration of diversification and deterrence policies, China’s ability to exert economic pressure on Europe is likely to increase further.
The study concludes that Europe’s long-term objective should be to dismantle the strategic leverage created by China’s dominance of critical raw materials by eliminating key dependencies.
Measures to strengthen alternative supply chains
The report recommends:
- Financing new mining and refining facilities in Europe and partner countries through public investment.
- Introducing public support schemes and price guarantees.
- Building a coalition with countries including Australia, South Korea, India, Brazil, Indonesia, Malaysia and the Democratic Republic of the Congo.
Measures to protect European demand
The analysis also recommends:
- Coordinated trade measures across partner economies.
- Prioritising components produced in Europe and partner countries in public procurement.
- Supporting alternative supply chains outside Chinese-controlled ecosystems.
Strengthening deterrence mechanisms
To increase resilience, the EU should:
- Make greater use of the EU Anti-Coercion Instrument (ACI).
- Coordinate potential economic responses with the United States and Japan.
- Use export controls, particularly in advanced semiconductor technologies, as a strategic policy tool.
