Full Breakdown
EU and US Push to Cut Strategic Dependence on China
9/3/2026, 12:15:39 AM
Policy Moves and Legislative Proposals
The European Commission is drafting a “diversification instrument” that would obligate firms in critical sectors to broaden their supplier base, aiming to curb the bloc’s reliance on Chinese inputs. The proposal sits alongside the Industrial Accelerator Act, which would bar certain Chinese products from public procurement and tighten rules on take-overs of European companies. In the United States, Treasury Secretary Scott Bessent announced that he will urge G-20 members to re-examine trade terms with China to shrink global imbalances and press Beijing toward a more domestically-focused economy.
Background & Context
- EU trade balance: The EU’s goods trade deficit with China has accelerated, reaching a record €1 billion per day in 2025. EU officials call the situation “untenable” and cite Chinese domestic policies and pricing as drivers.
- US trade balance: After the reinstatement of tariffs under President Donald Trump, the United States cut its trade deficit with China by roughly one-third in the first six months of 2026, falling to $73.9 billion (U.S. Census Bureau).
- Sectoral dependence: Chinese firms dominate the EU battery market, supplying over 80 % of residential battery storage and nearly 88 % of lithium-ion battery imports (Wood Mackenzie). Rare-earth and other critical raw materials are also largely sourced from China, a vulnerability the EU links to climate-transition and defence goals.
Data & Statistics
| Indicator | Figure | Source |
|---|---|---|
| Residential battery market share (China) | > 80 % | Euronews (Hoekstra) |
| Lithium-ion battery imports (China) | ? 88 % | Euronews (Hoekstra) |
| EU extraction of critical raw materials (2026) | ~ 3 % | Euronews (Katainen) |
| EU processing of critical raw materials (2026) | ~ 15 % | Euronews (Katainen) |
| EU recycling of critical raw materials (2026) | ~ 10 % | Euronews (Katainen) |
| EU-China goods trade deficit (2025) | €1 billion per day | Euronews (von der Leyen) |
| US-China trade deficit (first half 2026) | $73.9 billion | Straitstimes (Bessent) |
Official Statements & Responses
- Ursula von der Leyen, Commission President, said on 27 August that dialogue with China must produce results and that the EU is ready to use its full set of instruments when dialogue fails.
- Wopke Hoekstra, EU Climate Action Commissioner, warned that postponing diversification would make the green transition “more costly” and likened current exposure to China to Europe’s former reliance on Russian energy.
- Jyrki Katainen, EU special envoy for Arctic affairs, highlighted the Arctic’s potential to supply rare-earth metals and called for a “central kitchen” processing hub in northern Europe.
- Scott Bessent, U.S. Treasury Secretary, framed China’s $1.2 trillion trade surplus as unsustainable and urged coordinated G-20 action.
On-the-Ground Reports
During a Brussels briefing on the Arctic strategy, a young Arctic resident questioned whether the EU’s push to “become increasingly dependent” on the region risked turning local communities into instruments of European economic security. The envoy acknowledged the concern, noting that Europe must balance resource extraction with sustainability and economic security.
What’s Next
- EU trade commissioner Maroš Šefcovic is scheduled to travel to Beijing in October; the European Parliament’s International Trade Committee will assess progress on 2 September.
- Technical EU-China talks are slated for October, aiming to advance diversification measures.
- The G-20 finance leaders meeting on 30 August 2026 will feature Bessent’s call for coordinated trade-barrier assessments.
- The EU plans to develop the proposed “central kitchen” hub, with potential locations in northern Sweden or Finland, pending investment and regulatory support.
