EU's push to reduce reliance on China could come at a price
Brussels is preparing a new tool to shield the EU economy from countries weaponising its strategic dependencies. But European businesses fear the costs of diversification - and question which sectors will be targeted.
The European Commission plans to release a tool in early December to encourage companies to diversify their suppliers and lessen their reliance on a single nation, as they gear up for an EU leaders' summit. China, despite not being mentioned explicitly, is a primary target due to its actions that hindered the EU's access to essential resources.
In 2025, China imposed restrictions on rare earth exports, vital for green technologies, digital industries, and defense, following a trade conflict with the United States. Earlier that year, the EU automotive sector faced a setback when China cut off access to crucial chips due to a disagreement with the Dutch government over a chipmaker.
As negotiations with China continue to take shape, diversification has become a pressing concern in areas where being overly dependent on a single supplier can jeopardize the EU's security and economy. The Commission's upcoming proposal aims to tackle situations where a dominant supplier country could jeopardize the EU's supply security and economic stability.
Companies have expressed concerns about the potential increase in costs due to the need to find alternative suppliers. EU Trade Commissioner Maroš Šefčovič emphasized that businesses are at the forefront of this effort and must integrate the cost of resilience into their business models.
While the specific sectors and criteria for the proposal have yet to be determined, it is clear that some dependencies, such as rare earths, which are dominated by China, are seen as non-negotiable. The Commission is expected to draw inspiration from the successful Energy Union, which pushed European companies to diversify their energy sources away from Russia following the Ukraine war.
This could serve as a blueprint for the diversification tool. The minimalist approach would focus on a few sectors, while the maximalist approach would extend to a broader range of industries, potentially imposing tariffs on excessive reliance on a single supplier.
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