Highlights

• China's export controls on rare-earth minerals have severely disrupted European industrial production, particularly in automotive and technology sectors.
• The EU is almost entirely dependent on China for rare earth minerals, prompting urgent efforts to diversify supply chains.
• Strategic resource restrictions demonstrate how trade dependencies can be weaponized in global economic conflicts.

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China’s tightening of rare-earth exports is no longer a distant concern—it has become a direct blow to European industry. From automotive lines slowing down to chipmakers appealing directly to Beijing, Europe is learning the hard way what dependence looks like when strategic resources are weaponized.

How the Squeeze Began

The pinch traces back to April, when China placed seven rare earths and permanent magnets under export controls. Licenses are now required for shipments, and according to Bloomberg, exports collapsed soon after—even as China’s broader trade numbers surged to record highs. With Beijing controlling roughly 90 percent of global rare-earth magnet production, the impact was immediate.

European carmakers have had to delay or halt production, while wind and electronics sectors are facing spiraling costs. Rare-earth magnets, built from alloys like neodymium and samarium-cobalt, are the strongest permanent magnets known—and irreplaceable for electric vehicles, turbines, robotics, and countless advanced technologies.

Collateral in a Bigger Contest

The timing was no coincidence. Washington escalated tariffs under President Donald Trump, and Beijing responded with restrictions on rare earths—demonstrating once again how strategic resources double as economic leverage. Europe, though not a central combatant, finds itself caught in the crossfire.

Holger Görg of the Kiel Institute warned that such restrictions cannot be considered in isolation: “These links are there, trade flows are interconnected among each other.” The remark underscores that in an interdependent global economy, when giants spar, their tremors spread outward.

Admissions from Brussels

European Commission officials are under no illusions. Outi Slotboom, director for supply chains at the EC, conceded at a recent conference that “in more than 50 per cent of the cases, vulnerabilities and dependencies are caused by China.” That acknowledgment is striking in its bluntness.

A September 8 EC study further spelled out the scale of the problem: Europe is “almost entirely reliant” on China for heavy rare earths, while light rare earths also come overwhelmingly from Chinese suppliers. Recycling and substitution remain marginal, leaving industry with little flexibility. The immediate results: higher costs, weaker competitiveness, and delayed investment decisions across critical sectors from automotive to renewables.

Shifting Trade Chessboard

Brussels is now scrambling to diversify. Revamped agreements with Mercosur (opens in a new tab) and Mexico are moving forward, while talks accelerate with India, Indonesia, Vietnam, Japan, and others. The EU sees these deals less as opportunities for new markets and more as defensive bulwarks against China’s stranglehold.

Yet the structural reality remains grim: the EU’s goods trade still runs deficits, while surpluses in services cannot make up for vulnerabilities in physical supply. Rare-earth disruptions do not just inflate costs—they undercut the EU’s industrial strategies and weigh directly on economic growth.

What Lies Ahead

The shortage is already biting, and Europe’s response will take years, not months. The supply squeeze is forcing the bloc to confront its overreliance on a single source. For rare earths, the problem is not just price volatility but existential dependency—an uncomfortable reminder that industrial power depends on more than factories; it depends on the minerals that make those factories run.

Source: Brussels Signal, “Chinese rare-earths shortage hits EU industry hard,” September 19, 2025

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