EU prepares new tool to cut strategic dependence on China

The European Commission is due to present a new instrument in early December aimed at pushing companies to diversify suppliers and reduce strategic dependencies on a single country. The proposal is expected to be unveiled a week before a meeting of European Union leaders. While China is not named in the draft description, the measure is clearly intended to address vulnerabilities linked to Beijing.

The plan follows a year in which supply-chain pressure exposed how dependent some European industries remain on Chinese inputs. According to the supporting material, Beijing blocked exports of rare earths in 2025 during a trade dispute with the United States, affecting materials used in green technologies, digital industries and defence. The same year, the European car industry was also put at risk after China cut off access to strategic chips during a dispute with the Dutch government over chipmaker Nexperia.

In a consultation with businesses that closed on Tuesday, the Commission said the new instrument would aim to address cases where a high level of strategic dependence on one supplier country creates a risk to the European Union's security of supply and economic security. Some companies warned that finding alternative suppliers could raise costs. Luisa Santos, deputy director general at BusinessEurope, said firms are already doing the maximum to keep costs down and choose suppliers based on price and performance.

The move reflects a broader shift in Brussels toward economic security and supply-chain resilience. European officials have increasingly argued that trade policy can no longer be separated from geopolitical risk, especially in sectors such as clean energy, advanced manufacturing and defence. The Commission's approach also comes as Brussels continues to negotiate with Beijing over how to rebalance the trade relationship.

The issue has become more urgent because the European Union has few easy substitutes in some strategic markets. Rare earths and advanced chips are not ordinary commodities; they sit at the centre of industrial production, energy transition plans and military supply chains. That makes diversification politically attractive, but also potentially costly for companies that have built their business models around existing suppliers.

Several details remain unclear, including which sectors will be covered and what criteria will be used to trigger the new tool. It is also not yet clear how strongly the instrument will push firms to change suppliers or whether it will include incentives, obligations or both. What happens next will depend on the Commission's formal proposal in early December and the reaction of member states and industry.

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