Brussels wants new rules that would make European companies spread out their supply chains rather than rely on a single main supplier. The EU says its trade relationship with China is now "unsustainable." Watch the video.
The European Commission wants to cap the share of any critical component that a company can buy from a single supplier at 30 to 40 percent. Firms would need at least two or three sources, none from the same country.
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The move targets sectors like clean energy, electric vehicles, semiconductors, and defence, where Europe relies heavily on Chinese exports, from rare earth magnets to battery materials. Beijing has used export controls as leverage, leaving European factories exposed.
All 27 Commissioners met on 29 May and agreed that the current trade relationship with China is unsustainable, backing a tougher de-risking strategy. The Commission has also launched the €3 billion ReSourceEU plan to build alternative supply sources across Europe.
The proposal faces serious hurdles. Critics warn it will raise costs, hurt competitiveness, and risk breaching World Trade Organisation rules. Any legislation must be written in country-neutral terms.