Trade Commissioner Pledges ‘New Tool’ to Diversify Suppliers and Reduce Reliance on China
Trade commissioner pledges new tool to diversify – On Friday, EU Trade Commissioner Maroš Šefčovič unveiled a fresh initiative aimed at helping European enterprises expand their supplier networks and mitigate risks tied to supply chain vulnerabilities linked to China. Speaking at the Brussels Economic Security Forum, a collaboration between the European Policy Centre and Euronews, Šefčovič emphasized the need for a targeted mechanism to address growing concerns about over-dependence on Asian suppliers. The move comes amid mounting pressure to secure critical materials independently, following recent disruptions that highlighted the fragility of Europe’s industrial supply chains.
Supply Chain Risks and Industry Concerns
Šefčovič pointed to specific instances where China’s control over essential goods, such as semiconductors and rare earth elements, had exposed European industries to potential crises. “Recent industrial cases, in particular supplies of chips and rare earths, have reinforced my conviction that a step change is necessary,” he stated. The commissioner’s remarks were underscored by the EU’s experience last year when China imposed export restrictions on rare earths—vital for green energy technologies and defense systems—as well as semiconductors crucial to the automotive sector. These actions created uncertainty, forcing European businesses to confront the risks of relying too heavily on a single supplier.
“Diversification now requires a dedicated instrument,” Šefčovič said at the Brussels Economic Security Forum, organised by the European Policy Centre and partnered by Euronews.
Proposed Measures and Industry Challenges
The new tool, which Šefčovič described as a “strategic approach,” would compel companies to source from at least three distinct suppliers. This would ensure that no single entity, including China, holds disproportionate influence over critical supplies. However, the commissioner acknowledged that the exact implementation of this policy remains to be determined, as the legal framework is still under development. “What to really do with the legal proposal” is the next hurdle, he noted, highlighting the complexity of balancing security with economic efficiency.
Industry leaders, while supportive of the initiative, may push back if the policy raises operational costs. Šefčovič conceded that businesses might hesitate to adopt stricter sourcing rules without clear incentives or guarantees. “Economic security is a shared responsibility,” he said, “and European companies must treat geopolitical risks as part of their core businesses.” The commissioner stressed that while the EU needs to protect its strategic interests, industries must also take proactive steps to safeguard their supply chains.
Recent Disruptions and Strategic Responses
The urgency for diversification was amplified by last year’s crisis, when China temporarily halted rare earth exports, threatening Europe’s ability to produce electric vehicles, wind turbines, and other green technologies. This move also disrupted the automotive industry, which relies heavily on semiconductors made by Chinese firms. In response, Dutch authorities intervened by acquiring Nexperia, a chipmaker whose Chinese parent company, Wingtech Technology, faced accusations of relocating operations to Asia. Beijing retaliated by blocking shipments of essential chips, further tightening its grip on European markets.
The incident served as a wake-up call for policymakers, revealing the EU’s vulnerability to supply chain shocks. Šefčovič noted that the bloc’s reliance on rare earths—90% of which are refined and processed in China—poses a significant risk. “Industry stands on the front line,” he added, “and we must have their back, but industry also must do its part.” This dual responsibility underscores the EU’s efforts to balance support for its businesses with measures to reduce dependency on foreign suppliers.
Global Trade Tensions and the EU’s Deficit
Europe’s push for supply chain resilience coincides with broader trade tensions. Last year’s disputes with the United States over rare earth exports led to temporary restrictions, which were resolved after months of negotiations. The agreement, however, only lasted until October 2026, leaving Europe in a precarious position. Šefčovič highlighted that China’s ability to leverage its supply dominance has become a critical concern, especially as the bloc grapples with a record trade deficit of €359.9 billion. This deficit reflects the EU’s ongoing struggle to level the playing field against Beijing’s trade practices.
Member states like France, Italy, Spain, the Netherlands, and Lithuania have voiced demands for stronger trade defense tools, urging the Commission to adopt a firmer stance. These calls align with the EU’s efforts to counter China’s growing influence in global markets. Šefčovič’s new initiative is part of a larger strategy to protect Europe from surging Chinese overcapacity, which has flooded global markets with goods at competitive prices. The goal is to ensure that European industries are not left exposed to sudden supply cuts or price manipulation.
Legislative Steps and Threats of Retaliation
Two proposed EU laws—the Industrial Accelerator Act and the Cybersecurity Act—have already drawn warnings from Beijing about potential retaliation. These measures aim to tighten access to the EU market for Chinese companies, but their implementation could escalate tensions. Šefčovič acknowledged that the EU’s actions might provoke a trade war if further steps are taken. Despite this, he remains confident that the new tool will help reduce Europe’s dependence on China while fostering a more resilient industrial base.
“We must have their back,” Šefčovič reiterated, referring to European businesses. “But industry also must do its part.” This philosophy guides the EU’s approach to diversification, which includes not only requiring multiple suppliers but also encouraging investment in domestic production. The commissioner’s vision is clear: to create a system where European companies are prepared for disruptions, whether from China or other global powers. As negotiations on the legal proposal continue, the EU is working to finalize a framework that ensures both security and sustainability in its supply chains.
Broader Implications for Economic Security
The push for supplier diversification is part of a broader effort to secure economic stability in an increasingly volatile global landscape. Šefčovič’s pledge to develop a new instrument reflects the EU’s recognition of the interconnectedness of trade and geopolitics. By reducing reliance on China, the bloc hopes to insulate itself from future crises, such as export blockades or sudden shifts in production. However, the success of this strategy depends on the cooperation of European businesses, which may need to adapt to new sourcing requirements.
For now, the focus remains on crafting a policy that balances risk mitigation with economic growth. The Brussels Economic Security Forum, which brought together policymakers and industry experts, has become a platform for discussing these challenges. Šefčovič’s announcement signals a shift in EU strategy, as the bloc moves toward more proactive measures to secure its strategic industries. With the threat of retaliation looming and the trade deficit persisting, the EU’s commitment to diversification is a critical step in ensuring long-term resilience against global supply chain shocks.
