Europe’s relationship with China has reached a critical juncture, as tensions over trade imbalances and access to vital resources escalate. Recent warnings from leading European business groups and think tanks paint a stark picture: the European Union is increasingly sidelined in global negotiations over rare earth elements and critical minerals, even as its industries remain deeply dependent on Chinese supply chains.
According to the European Union Chamber of Commerce in China, Beijing is “failing to address several long-standing concerns that European companies have about the country’s business environment.” This frustration boiled over in December 2025, when the Chamber highlighted that China’s massive trade surplus with Europe—exceeding $350 billion in 2024—has become unsustainable. In the first eleven months of 2025 alone, China’s global exports outstripped its imports by more than $1 trillion, with a significant portion of that surplus coming from sales to the EU.
The Chamber’s report, released on December 11, 2025, argues that China’s continued export growth to the EU is partly an attempt to offset weak domestic demand. But it’s not just about numbers: European firms are struggling with a business environment in China that remains opaque and unpredictable. As the Chamber bluntly put it, “China is pushing the EU to adopt a more aggressive approach than it currently has.”
This sense of urgency was echoed by French President Emmanuel Macron, who, just days earlier, threatened Beijing with “strong European measures, such as customs duties,” if the yawning trade gap isn’t addressed. Macron’s comments reflect a growing impatience in European capitals, where leaders are weighing tougher responses to what they see as unfair Chinese practices.
One specific flashpoint is China’s export controls on rare earth elements and other critical minerals—materials essential for manufacturing everything from electric vehicles to defense equipment. In 2025, Beijing imposed new licensing requirements for the export of rare earths, gallium, germanium, graphite, and permanent magnets. These restrictions, officially justified as necessary for national security, are widely interpreted as countermeasures in the ongoing trade war between China and the United States.
European manufacturers, already reeling from supply chain disruptions, have been hit especially hard. According to a recent survey by the EU Chamber of Commerce in China, one in three European companies is now considering moving its supply chains out of China in response to the export controls. The Chamber’s president, Jens Eskelund, described the predicament as “scary” for both companies and governments. “You cannot assume that you will not inadvertently become collateral damage to someone else’s fight,” Eskelund warned, highlighting how trade disputes have morphed into broader security concerns.
But Europe’s challenges go beyond its direct dealings with China. The Mercator Institute for China Studies (MERICS), a Berlin-based think tank, warns that Europe is losing influence in the global contest for critical minerals. In its latest Top China Risks 2026 report, MERICS argues that Beijing and Washington are now managing supply chain stability through direct bilateral channels, often leaving Brussels on the sidelines.
The most vivid example came on October 30, 2025, when U.S. President Donald Trump and Chinese President Xi Jinping met in Busan and agreed to a 12-month pause on some of China’s export controls. While this so-called "Busan truce" temporarily eased restrictions, it was a strictly bilateral deal—Europe benefited from the de-escalation but was not involved in the negotiations. Earlier restrictions from April 2025, including licensing requirements, remained in place and continued to impact European manufacturers.
MERICS analysts Helena Legarda, Rebecca Arcesati, Daria Impiombato, and Andreas Mischer highlight that China’s export controls are not just short-term tactics, but part of a “long-term industrial strategy” to keep technology value chains anchored in China and block the emergence of competing global supply chains. As the report notes, “Europe is at risk of becoming a spectator in what it bluntly calls an emerging ‘G2’ world.”
The consequences of exclusion are real. European industries—especially those involved in electric vehicles, renewable energy, and advanced manufacturing—depend heavily on Chinese-processed rare earths and magnets. While projects in Estonia, Norway, and France aim to build up local processing capacity, these efforts remain small compared to China’s vast refining base.
Without a rapid acceleration of its own magnet, midstream, and semiconductor capacity, Europe risks being relegated to the role of a price-taker in a market whose rules are increasingly set by Beijing and Washington. “There is an earth market that punishes passivity,” the MERICS report cautions. “If Europe does not accelerate its own magnet, midstream and semiconductor capacity, it drifts into the role of price-taker in a market whose rules are increasingly written in Beijing and Washington, not in Brussels.”
The strategic stakes are high. Rare earth elements and critical minerals are the backbone of the green transition, advanced electronics, and defense systems. Control over these resources means leverage not just in trade, but in technology and security policy. For Europe, dependence on Chinese supply chains is more than an economic vulnerability—it’s a geopolitical risk.
In response, some European policymakers are calling for a more assertive industrial strategy. This could include investments in domestic mining and processing, incentives for recycling and substitution, and coordinated efforts to diversify supply sources. However, as the MERICS report notes, existing European projects are still dwarfed by China’s dominance in the sector.
Meanwhile, the EU faces a delicate balancing act. On one hand, it must defend its economic interests and reduce strategic dependencies. On the other, it cannot afford to provoke a full-blown trade war with China, which remains a key market for European exports and a vital link in global supply chains. The specter of collateral damage looms large, as Eskelund warned: “It’s no longer just trade disputes; it’s been veering into security, and that is a different discussion.”
As the world’s two largest economies—China and the United States—negotiate the rules of the game, Europe finds itself caught in the middle, often without a seat at the table. The challenge now is whether Brussels can muster the political will and strategic vision to secure its interests in an increasingly competitive and fragmented global economy.
For European industries and policymakers, the message from both the EU Chamber of Commerce in China and MERICS is clear: complacency is not an option. The time for decisive action is now, before Europe’s role in the critical minerals market shrinks even further.
