European Union Trade Commissioner Maroš Šefčovič announced on Friday a forthcoming legislative tool designed to compel European businesses to diversify their supply chains and reduce dependence on China for critical materials. Speaking at the Brussels Economic Security Forum, Šefčovič stated that the initiative would require companies to source from at least three different suppliers, though the precise legal framework remains under development.
“Diversification now requires a dedicated instrument,” Šefčovič said. “Recent industrial cases, in particular supplies of chips and rare earths, have reinforced my conviction that a step change is necessary.” The announcement follows disruptions last year when China blocked exports of rare earths—essential for green technologies and defence—as well as chips used by the automotive industry.
The move risks further straining relations with Beijing, which has already threatened retaliation if the EU closes its market to Chinese companies. The bloc currently faces a record trade deficit of €359.9 billion with China, and several member states—including France, Italy, Spain, the Netherlands, and Lithuania—have urged the Commission to adopt tougher trade defence instruments.
Industry Responsibility and Geopolitical Risks
Šefčovič emphasized that economic security is a shared responsibility, telling Euronews that European companies must treat geopolitical risks as part of their core business. “Industry stands on the front line. We must have their back, but industry also must do its part,” he said. However, EU businesses may resist the measure if it increases production costs.
In 2025, Dutch authorities took over chipmaker Nexperia amid concerns that its Chinese owner, Wingtech Technology, might relocate key operations and intellectual property to China. Beijing responded by temporarily blocking exports of chips essential to Nexperia and the European automotive industry. The threat extends beyond chips: the EU relies on China for 90% of its refined rare earths, a dependency that leaves the bloc vulnerable to supply shocks.
During last year’s trade tensions with the United States, China also halted rare earth exports. Shipments resumed after several weeks of negotiations, but the truce lasts only until October 2026, leaving Europe with a Sword of Damocles hanging over it. The EU has already proposed two pieces of legislation—the Industrial Accelerator Act and the Cybersecurity Act—aimed at tightening market access for Chinese companies, drawing threats of retaliation from Beijing and raising the prospect of a trade war.
Šefčovič’s announcement comes as the EU seeks to bolster its economic security amid growing tensions with both China and the United States. The Commission is also pursuing a broader tech sovereignty plan to challenge US and Chinese dominance, as outlined in the EU Unveils Tech Sovereignty Plan. Meanwhile, the EU trade chief is scheduled to meet the Chinese envoy to discuss escalating tensions, as reported in EU Trade Chief to Meet Chinese Envoy Amid Escalating Trade Tensions.
The new supplier diversification tool is expected to be formally proposed later this year, with details on compliance mechanisms and potential exemptions for small and medium-sized enterprises still to be determined. The Commission aims to balance the need for resilience with the imperative of maintaining open markets, a challenge that will test the bloc’s unity in the face of external pressures.
