EU-China Trade Strains Escalate: From Rare Earths and Chips to Agricultural Pressures

The landscape of global trade is shifting under mounting pressure between the European Commission (EC) and China. A cascade of developments involving rare earths, semiconductors, agricultural products and supply-chain vulnerabilities now foregrounds the EU as a major battleground in the broader U.S.-China rivalry.

Rare Earths & Strategic Materials: Europe No Longer a Sideline

Recent reports say Maroš Šefčovič, the EC Vice-President Commissioner for Trade and Economic Security; Interinstitutional Relations confirmed that China’s one-year suspension of rare earth export restrictions will apply to the EU as it will to the U.S.-an erga omnes decision.[1] Ironically, the phrase-rooted in international law to describe obligations owed “toward all”-here denotes not a shared right, but a universal exception granted by Beijing’s discretion. It highlights how the grammar of global trade has shifted: what was once the language of collective norms now frames selective reprieves in a world of strategic dependencies. The move comes as Brussels and Beijing continue high-level dialogue on the dangerously slow licensing of exports that has weighed on European industry. The Commission has proposed joint EU procurement and strategic stockpiling of critical raw materials.

At the same time, the EC is reportedly considering trade measures including an “in-kind” tariff, which would obligate some Chinese exporters to contribute critical raw materials to EU stockpiles, and possibly targeted export restrictions if diplomacy fails to secure access.

This  reflects the European Union’s recognition that China’s dominance in rare earths is a strategic risk. The EU plans to launch its own program, “RESourceEU,” to reduce dependence on China while boosting domestic processing and stockpiling of critical raw materials.

Semiconductors: A Dispute Over Nexperia Raises the Stakes

The row over Netherlands-based chip manufacturer Nexperia, owned by Chinese group Wingtech, has turned into another flashpoint. The Dutch government’s takeover of Nexperia on grounds of national-security risk provoked China’s retaliation: export bans and an interruption of wafer shipments. The disruption has alarmed European automakers, which warned that production might halt within days if key chip supplies remain blocked.
The EU is now seeking a diplomatic solution. Tech Commissioner Henna Virkkunen met with Nexperia leadership and affirmed that the crisis highlights the need for supply-chain diversification, stock visibility and resilience under the EU Chips Act. [2] The EU is caught between Scylla and Charybdis – squeezed between U.S. sanctions on China and Beijing’s retaliatory measures with limited autonomy on strategic technologies. It’s being squeezed from both sides, with shrinking room to manoeuvre and little control over the technologies that will shape the next decade.


Agriculture & Trade: U.S., EU and Mercosur Pressures

Beyond industry, trade tensions extend to food and agriculture. EU Trade Commissioner Šefčovič guaranteed reciprocity in the EU-Mercosur agreement, intending to deploy inspectors to Mercosur production sites to check  compliance with EU standards. He highlighted 57 protected Italian products and a 1,300% surge in mozzarella exports as examples of Europe’s agri-food strength, while promising automatic safeguards if price fluctuations exceed 10% and tighter port controls to protect EU producers.^[3]

Commissioner Šefčovič described the new U.S. anti-dumping tariffs on Italian pasta, pecorino and olive oil as “unacceptable”, pledging to work with Italy and the EU trade services to defend European agri-food interests.  Italy has been pressing the European Commission to intervene over proposed U.S. anti-dumping tariffs on Italian pasta, pecorino Romano, and olive oil. The Italian Agriculture Minister, Mr. Lollobrigida, has publicly stated that his ministry is closely monitoring the possible imposition of very high U.S. anti-dumping tariffs on Italian pasta exports, and that he and his government are working diplomatically to oppose these measures.

EU Trade Commissioner Maroš Šefčovič has also acknowledged Italy’s concerns and said Brussels is working with Washington to defuse the dispute, describing the planned measures as “unacceptable.” Italian producers remain skeptical, warning that the broader U.S.-EU trade framework still leaves many issues over import competition and agricultural protection unresolved.

Commissioner Šefčovič  was noting that the EU currently enjoys a €2 billion trade surplus with Mercosur. He stressed that the agreement aims to consolidate this success by lowering tariffs while maintaining reciprocity, safeguards, and a unified safety net. [4]

The Larger Picture: Europe’s Strategic Moment

The flurry of activity-from Chinese rare-earth controls and semiconductor standoffs to agriculture and trade safeguards-signals a critical juncture for the EU. It is no longer a bystander in the U.S.-China rivalry.

On rare-earths, the U.S. has stated it will secure alternative supplies within two years and vowed that China “will no longer be able to use rare earths as a coercive tool.” U.S. Treasury Secretary Scott Bessent told the Financial Times that China’s dominance in rare earth minerals would persist for “no more than 12 to 24 months,” adding that the United States expects to establish alternative supply sources within that period. [5] China, for its part, stressed its export controls are standard practice for “dual-use” goods.[6]

For Europe, the policy takeaway is clear: trade and industry are now inseparable from geopolitics and the economic rules of the past may no longer apply. The EU balance between Washington and Beijing, while asserting its own strategic autonomy and shaping the rules of the future.

In the industrial age, nations competed over territory. In the AI age, they compete over time.
China races, America competes, Europe deliberates. Each runs according to its own clock, and none can easily change it. The challenge ahead is synchronization-not to slow the fast, or rush the slow, but to align their rhythms toward a shared horizon of safety and progress.

For now, the clocks of power tick out of sync: one racing, one reasoning, one trading.

[1] “Sefcovic: “China must stop restrictions on rare earths, even for the EU.””

https://www.ansa.it/sito/notizie/mondo/2025/11/01/sefcovic-stop-cina-a-restrizioni-terre-rare-anche-per-ue_cd5a5058-4824-4feb-bbb6-dbe4f14b02f3.html

[2] Foo Yun Chee and Inti Landauro EU seeks diplomatic solution with Nexperia, EU tech chief says amid supply squeeze and  also https://fd.nl/tech-en-innovatie/1575941/eurocommissaris-over-nexperia-crisis-werken-aan-diplomatieke-oplossing

[3] Gianluca Atzeni “Trump’s tariffs are unacceptable: we’re working to exempt wine.” EU Commissioner Sefcovic reports to Italy. Lollobrigida and the industry associations gathered at the Masaf meeting are demanding guarantees on Mercosur and zero tariffs with the US. Coldiretti and Filiera Italia are dissatisfied: “We haven’t received any guarantees.”https://www.gamberorosso.it/notizie/attualita/trattative-dazi-commissario-ue-sefcovic/?utm_source=chatgpt.com

[4]  Roasario Amato, Sefcovic: “The pasta tariffs are unacceptable.” Lollobrigida: “The EU is committed to our products.” available at: https://www.repubblica.it/economia/2025/10/31/news/sefcovic_inaccettabili_i_dazi_sulla_pasta-424950947/

[5] Demtri Sevastopulo, “China ‘made a real mistake’ by ‘firing shots’ on rare earths, says Scott Bessent” October 31

U.S. Treasury Secretary Scott Bessent told the Financial Times that China’s dominance in rare earth minerals would persist for “no more than 12 to 24 months,” adding that the United States expects to establish alternative supply sources within that period.

[6] “China affirms rare-earth export controls align with international practices”

 In a press conference, a spokesperson of the Ministry of Commerce of the People’s Republic of China (MOFCOM) said: “items related to rare earths have dual civilian and military applications … this is consistent with international practice.