EU moves to force companies to diversify away from China in strategic sectors

The European Commission is drafting legislation that would require firms operating in strategic sectors to source from at least three separate suppliers, aiming to reduce reliance on a single provider such as China. Commissioner for Trade Maroš Šefčovič presented the plan at the Brussels Economic Security Forum, citing recent disruptions in chips and rare‑earth supplies that highlighted the need for a “step‑change” in supply‑chain resilience.

The proposal targets critical industries including semiconductors, rare‑earths, batteries, pharmaceuticals and advanced technologies. In addition to the diversification rule, the EU intends to speed up anti‑dumping and anti‑subsidy investigations and address industrial overcapacity. While officials argue the measures will safeguard the bloc’s economic security, they may raise production costs for businesses and risk retaliation from Beijing, which has already threatened counter‑measures if the EU restricts Chinese market access. The initiative comes as the EU grapples with a record trade deficit of €359.9 billion and growing concerns over unfair Chinese trade practices.