EU to Force Companies to Diversify Away From China
Get the Geopolitics newsletter
Daily geopolitics — wars, elections, sanctions, the diplomatic moves that move markets. Free.
- European Commission President Ursula von der Leyen announced the Commission will propose a law compelling EU companies to diversify key supplies, saying businesses had de-risked from China "at far too slow a pace" and that the measure could become redundant if companies voluntarily step up.
- EU goods trade deficit with China now totals roughly €1 billion ($1.15 billion) per day, a figure European Council President Antonio Costa called "simply unsustainable" and said demanded concrete results.
- The de-risking push gained urgency after China exploited its dominance in critical minerals processing by placing export restrictions on rare earths last year, von der Leyen said, framing it as the issue that "came to a head."
- EU leaders at the Brussels summit agreed to enter dialogue with main trading partners on "global macroeconomic imbalances" and review whether additional trade measures are needed, though China went unnamed in the official conclusions.
- The G7 issued a joint statement on Wednesday on stepping up cooperation to reduce critical mineral dependencies; China responded by urging members to respect market economy principles rather than favor "small cliques."
- The imbalance is "more critical" because transatlantic tariffs have diminished EU access to the U.S. market, leaving fewer alternative outlets and compounding pressure to rebalance away from Chinese suppliers.
- EU leaders also agreed to present a united front in the event of retaliation from third countries, with Belgian PM Bart De Wever noting "everyone is vulnerable to some extent, including us" but some members more exposed than others.
Why it matters: By tying diversification to an EU-level legal requirement rather than voluntary action, the Commission is converting a €1 billion-per-day deficit and last year's rare earths shock into a binding compliance obligation for European industry—with U.S. tariffs already closing off the alternative transatlantic market, companies now face shrinking options for where to source or sell.
