Highlights

• MERICS warns Europe is losing influence in U.S.-China negotiations over rare earth and critical minerals trade.
• Beijing and Washington manage supply chain stability through direct bilateral channels without European participation.
• China's export controls on gallium, germanium, graphite, and permanent magnets hit European manufacturers hard.
• The Busan truce between Trump and Xi excluded Europe from negotiations despite its dependence on Chinese processing.
• The report warns that European complacency is dangerous—without accelerating its own magnet and midstream capacity, Europe risks becoming a price-taker in a market controlled by Beijing and Washington, not Brussels.

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Is there a shrinking stage for Europe’s mineral future? MERICS’ new Top China Risks 2026 (opens in a new tab) report lands with a quiet but unmistakable alarm bell: Europe is losing its seat at the table in the U.S.–China rivalry that increasingly shapes the rare earth and critical minerals order. The report notes that when President Donald Trump and China’s Xi Jinping met in Busan on October 30, they agreed to a 12-month pause on parts of China’s new rare earth export controls, but the deal was strictly bilateral. Europe benefited from the de-escalation, MERICS stresses, but it did not help negotiate it.

Program Head

For investors mapping supply-chain risk, that is the central point: Beijing and Washington are now managing critical-mineral stability through direct channels, often without European participation, while European industry absorbs the downstream consequences.

The recent report was authored by program head Helena Legarda (opens in a new tab), lead analyst Rebecca Arcesati (opens in a new tab), senior analyst Daria Impiombato (opens in a new tab) and analyst Andreas Mischer (opens in a new tab).

The Magnet That Shows Who Matters

The report highlights China’s rare earth and technology-metal export restrictions as a case study. Controls rolled out in April and October 2025—covering rare earth elements, gallium, germanium, graphite and permanent magnets—were formally framed as responses to U.S. tariffs, yet they hit European manufacturers just as hard.

Even the Busan truce, which suspended the second wave of controls for one year, came with a catch: earlier April restrictions and licensing requirements remain in place. MERICS is on firm ground here. Its depiction of China using export controls as a geoeconomic lever—tightening to signal displeasure, loosening to stabilize key bilateral relationships—is consistent with the legal texts and trade data we’ve been tracking at Rare Earth Exchanges.

Where the Story Stings—and Where It’s Subtle

MERICS goes further, arguing that Europe is at risk of becoming a spectator in what it bluntly calls an emerging “G2” world. That may be uncomfortable, but it is largely supported by Europe’s structural dependence on Chinese rare earth magnets, Chinese midstream processing, and Chinese-controlled semiconductor inputs.

The only place the narrative arguably underplays reality is on Europe’s own efforts: projects in Estonia, Norway, and France do exist and matter, but they are small against the scale of China’s refining base. The report is clearest—and most accurate—on one key point: Beijing’s export controls are designed to keep technology value chains in China and to prevent the emergence of competing supply chains. That is not a passing tactic; it is a long-term industrial strategy.

The Investor Takeaway: Complacency Is the Enemy

The real danger MERICS flags is not just exclusion from high-level talks, but European complacency about being excluded. There is an earth market that punishes passivity. 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.

About MERICS

The Mercator Institute for China Studies (opens in a new tab) (MERICS) is a Berlin-based, non-profit think tank founded in 2013 by the German foundation Stiftung Mercator. It is now one of Europe’s leading research centers on contemporary China, focusing on the political, economic, technological and geopolitical dimensions of China’s rise and their impact on Europe.

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