Europe Aims to Break Its China Habit

European lawmakers are accelerating efforts to secure the critical mineral supply chains essential to powering the energy transition and high-tech defense, reflective of a broader awakening overtaking Europe as governments rush to de-risk ties with China amid fears of strategic vulnerabilities. 

Those concerns were turbocharged when China curbed exports of two chipmaking inputs, gallium and germanium, in August in retaliation for U.S. measures—further underscoring the risks of overdependence. The tit-for-tat trade measures continued Friday, when China announced export restrictions on some forms of graphite, which is a key component in the manufacture of batteries for electric vehicles. To guard against future disruptions in the critical mineral sector, Japan has worked to build out an alternate rare-earth supply chain after suffering China’s wrath in 2010; the United States injected new momentum into its battery sector last year with generous Inflation Reduction Act (IRA) tax credits. 

Yet this reckoning has come far later for Brussels, which is just now coming to grips with its own critical mineral vulnerabilities.

“Europe was asleep behind the wheel when it came to electric vehicles and raw materials,” said Tom Moerenhout, a research scholar at Columbia University’s Center on Global Energy Policy, who noted that the European Union had never adopted a joint approach to the challenge. There’s “never [been] something very coordinated or as fiscally powerful as the Inflation Reduction Act, so they are late to the game,” he added.

As Brussels crafts its game plan, Australian Resources Minister Madeleine King warned last month that European carmakers must “get moving or miss the boat” on Australia’s critical minerals sector, part of a bid to rapidly ramp up European investment there. But it’s not just the auto industry that stands to be impacted. Critical minerals, which include rare earths, cobalt, and lithium, underpin F-35 fighter jets, wind turbines, and much more. For nearly all of these resources, even graphite, China overwhelmingly dominates the refining and processing stages, although its command is most pronounced in rare-earth supply chains. 

Critical minerals are “like the skeleton of the world economy,” said Joris Teer, a strategic analyst at the Hague Centre for Strategic Studies. “Without rare earths and other materials, there’s no MRI technologies, there’s no drones, there’s no jet fighters, there’s no offshore wind turbines.”

Given these minerals’ importance, global concerns about China’s grip over their supply chains date back to at least 2010, when Beijing briefly weaponized its rare-earth supply against Tokyo. But at the time, Europe’s economic ties with China were still deepening, with trade in goods skyrocketing by 400 percent between 2000 and 2010. And with its eye on other priorities—including responding to the aftershocks of the 2008 financial crisis, expanding the renewable energy sector, and then responding to the COVID-19 pandemic and Russia’s invasion of Ukraine—Brussels has taken longer to put pen to paper with critical minerals. 

“The thinking has been there for well over a decade that Europe needs to do something about these dependencies on critical minerals,” said Luke Patey, a senior researcher at the Danish Institute for International Studies. “But it’s only been in the last few years that policy language has been formulated on what to do.” 

European efforts now appear to be picking up speed as lawmakers unroll a raft of legislation and partnerships with both key allies and mineral-rich countries alike. Brussels is part of the recently expanded Minerals Security Partnership (MSP), an initiative that is aimed at strengthening and expanding critical mineral supply chains among all 14 of its members, including the United States, the United Kingdom, Australia, Canada, and South Korea. According to U.S. officials, Washington also hopes to finalize an agreement with Brussels that allows European firms to cash in on IRA tax credits—a previous source of tension between the two.

Through the Global Gateway, the EU’s answer to China’s sprawling Belt and Road Initiative, Brussels is also currently in the process of inking agreements with the Democratic Republic of the Congo and Zambia that focus on developing mineral value chains. Congo currently dominates global cobalt mining, while Zambia is rich in copper. 

Beyond expanding global partnerships, Brussels is attempting to boost its industry by unveiling the Critical Raw Materials Act, which is designed to slash Europe’s critical mineral dependence by setting ambitious targets for domestic sourcing, processing, and production. Officials have also championed a buyers club that could include partners such as Australia, Canada, and the United States. 

“Raw materials are vital for manufacturing key technologies for our twin transition—like wind power generation, hydrogen storage, or batteries,” European Commission President Ursula von der Leyen said in March. “And we’re strengthening our cooperation with reliable trading partners globally to reduce the EU’s current dependencies on just one or a few countries.”

But given the challenges in building the network of sourcing, refining, processing, and manufacturing systems, experts warn that it will likely take decades for Europe to meaningfully reduce its reliance on Beijing. 

“The EU is in a terrible position right now,” Moerenhout said. “I think the Raw Materials Act is going to start shifting the needle, but we also need to be honest that this is not a project for five or 10 years.” 

Still, as Europe reels from Russia’s weaponization of natural gas exports last year—and the economic havoc and political strife that it stoked—officials appear determined to avoid repeating past mistakes, particularly as tensions rise and pressure grows to minimize risks from Beijing. The European Commission officially began an anti-subsidy investigation into electric cars imported from China this month. 

“The real wake-up call, I think, was with Russia’s brutal invasion of Ukraine,” said Cecilia Malmstrom, a former European commissioner for trade currently at the Peterson Institute for International Economics. “Some countries realized we are so dependent on oil and gas from Russia and they are making it a geopolitical tool—and we do not want to find ourselves in that situation again with China.”