EU threatens trade sanctions over China's rare earth export restrictions

Monday 27 October 2025 - 08:50

By: Dakir Madiha

EU threatens trade sanctions over China's rare earth export restrictions

The President of the European Commission, Ursula von der Leyen, has issued a stern warning to China, signaling that the European Union may deploy its most powerful trade weapon in response to Beijing’s tightening control over rare earth exports. The move, which has disrupted European supply chains, underscores escalating tensions between the EU and China over critical material dependencies.

Speaking at the Berlin Global Dialogue, von der Leyen emphasized the EU’s readiness to use “all instruments in our toolbox if necessary.” Her comments pointed to the bloc’s anti-coercion instrument, colloquially dubbed the “trade bazooka.” This mechanism, yet to be used, could impose significant economic penalties, including investment restrictions, intellectual property withdrawals, and targeted sanctions.

Mounting pressure amid China's export restrictions

Von der Leyen’s remarks come in the wake of China’s sweeping new export measures announced on October 9. These restrictions, requiring licenses for rare earth exports and expanding controls to processing technologies, have forced several European industries, including major automotive and machinery sectors, to halt production due to shortages of critical materials.

“China has significantly intensified export controls on rare earths and battery materials in recent weeks and months,” von der Leyen warned. Highlighting the EU’s reliance on China for 90% of its rare earth magnet imports, she drew parallels to Europe’s earlier dependence on Russian energy during the Ukraine crisis. “We learned that painful lesson with energy; we will not repeat it with critical materials,” she added.

The EU’s toughened stance follows mounting pressure from leaders, including French President Emmanuel Macron, who urged the Commission to consider activating the anti-coercion tool during last Thursday’s Brussels summit. German Chancellor Friedrich Merz also indicated potential support for stricter measures, marking a shift for Berlin, which has historically resisted coercive actions against China due to its automakers’ reliance on the Chinese market.

A new strategy for critical material independence

Alongside her warnings, von der Leyen unveiled RESourceEU, a comprehensive strategy aimed at reducing the EU’s dependence on Chinese critical raw materials. The initiative includes fast-tracked partnerships with alternative suppliers such as Australia, Canada, Kazakhstan, Uzbekistan, Chile, Ukraine, and Greenland.

The strategy also prioritizes recycling, with von der Leyen noting that up to 95% of critical materials can be recovered from products like batteries. Additional measures include joint procurement, strategic stockpiling, and bolstering domestic production and processing capacities.

The plan mirrors the REPowerEU initiative, launched after Russia’s invasion of Ukraine, to end reliance on Russian energy. “Be it energy, raw materials, defense, or digital, Europe must strive for autonomy. This is our moment to act,” von der Leyen concluded.