The Illusion of De-risking: Why Europe’s Dependence on China is Deepening
For years, the official mantra in Brussels has been “de-risking.” The goal was simple: reduce the European Union’s over-reliance on Chinese supply chains to protect economic security. However, recent reports suggest that the reality on the ground is the exact opposite. According to the European Chamber of Commerce in China (EUCCC), many of the 1,600 European companies operating in China are only now realizing the gravity of their situation. Rather than decreasing, dependence in some sectors is actually intensifying. Jens Eskelund, president of the European Chamber, highlighted the severity of this vulnerability with a startling observation: he noted that it is unclear whether Europe even retains the capacity to produce basic items, such as toothpaste, if it were to be completely cut off from Chinese supply chains.
Entering the “Era of Coercion”
The landscape of international trade is shifting. In the past, export bans were primarily tools used during trade wars. Today, economic measures are increasingly tied to political statements. Experts, including Tobias Gehrke of the European Council on Foreign Relations, suggest we have entered an “era of coercion.” Although Europe has previously faced “grey zone” tactics—such as sudden customs delays or informal boycotts of Norwegian salmon, H&M clothing, and Lithuanian timber—these actions are now becoming institutionalized. The shift toward official blacklists, formal sanctions, and strict export controls means that economic retaliation can now be triggered by political disagreements, particularly regarding sensitive issues like Taiwan.
The Rare Earths Trap
Rare earths are the backbone of modern technology, and China’s control over them represents a “persistent business danger.” A particularly concerning development is the introduction of “extraterritorial jurisdiction” clauses. Under such rules, even products manufactured outside of China may require an export license if they contain Chinese-origin rare earths and are being transferred to a third country. While this specific clause was suspended for a period ending in November 2026, the lack of predictability leaves European firms in a precarious position.
Strategic Deterrence: Can Europe Find Its Own Leverage?
The current state of affairs has led some experts to argue that Europe’s cautious approach is insufficient. Tobias Gehrke uses a vivid analogy: if someone points a six-bullet revolver at your head, removing four of the bullets does not eliminate the danger. To truly secure itself, Europe may need to develop its own “economic deterrence theory.” The goal of deterrence is to create a threat so significant that the opposing party is discouraged from acting in the first place.
Potential Countermeasures
To move from a defensive to an offensive posture, Europe could consider several levers:
- Export Controls: Following models used by other global powers, the EU could restrict the export of critical components, such as spare parts for chip production equipment.
- Import Barriers: China’s production of consumer goods—including washing machines, refrigerators, and vacuum cleaners—often far exceeds its domestic demand. Brussels could use tariffs to limit the influx of these overproduced goods into the European market.
However, these moves carry significant risks. As former Spanish Foreign Minister Arancha González Laya suggests, while Europe should not be paralyzed by fear of retaliation, it must similarly avoid being dragged into unnecessary conflicts.
The Lesson from the US Experience
The current tension mirrors a historical shift seen in the United States. Years ago, the prevailing theory—championed by figures like Hillary Clinton—was that increased mutual interdependence would prevent conflict by making the cost of war too high. In reality, the balance of dependence shifted. As the US became more dependent on China, China decreased its reliance on the US. This realization fueled the aggressive strategic shifts seen under the Trump administration, which prioritized domestic energy production and the securing of strategic industrial bases. Europe now faces a similar crossroads: continue a cautious “de-risking” strategy that may be failing, or develop a more robust capacity for economic deterrence to ensure it has actual chips on the table during future negotiations.
Frequently Asked Questions
What does “de-risking” mean in the EU-China context?
De-risking is the EU’s strategy to reduce economic vulnerabilities and dependencies on China, particularly in critical sectors like raw materials and technology, without completely decoupling the two economies.
Why are rare earths so important?
Rare earths are essential for high-tech applications, including electronics, defense systems, and green energy technology. Since China controls the vast majority of their processing, they can use export controls as geopolitical leverage.
What is “economic coercion”?
Economic coercion occurs when a state uses trade restrictions, sanctions, or boycotts to force another country to change its political positions or behavior.
What do you suppose? Should Europe take a more aggressive approach to economic deterrence, or is the risk of retaliation too high? Share your thoughts in the comments below or subscribe to our newsletter for more deep dives into global economic security.
