The European Union is considering a range of responses to China's tightened export controls on rare earths and battery materials, according to European Commission President Ursula von der Leyen. This development highlights the growing tension between the EU and China over critical resources.

The Challenge

Von der Leyen emphasized the significance of the issue, noting that 90% of Europe's rare earth magnet consumption is sourced from Chinese imports. The recent restrictions imposed by China pose a substantial risk to the EU's supply chain and industrial capabilities.

EU's Approach

The EU's strategy to address this challenge is multifaceted:

1. Dialogue: The initial focus is on finding solutions through diplomatic channels with Chinese counterparts.
2. Preparedness: Von der Leyen indicated readiness to utilize all available instruments if needed.
3. Coordination: The EU is prepared to work with G-7 partners in response to China's actions.

Potential Measures

French President Emmanuel Macron has suggested a more assertive approach. He proposed considering the use of the EU's anti-coercion instrument (ACI) against China if diplomatic efforts fail to resolve the issue.

The Anti-Coercion Instrument (ACI)

The ACI represents the EU's most potent trade tool, designed specifically to counter deliberate coercive actions from third countries. However, it's worth noting that this instrument has never been deployed before, making its potential use against China a significant step.

Implications

This situation underscores the complex interdependencies in global supply chains, particularly in critical sectors like rare earth elements and battery materials. The EU's response to China's export controls could have far-reaching consequences for international trade relations and the global technology industry.

As the situation develops, the EU's actions will be closely watched by global markets and policymakers alike. The outcome of this tension between the EU and China could set important precedents for how nations navigate resource dependencies and trade disputes in an increasingly interconnected world.

The European Union is preparing for its 19th round of sanctions against Russia, while simultaneously developing trade options to counter China's planned export controls on critical raw materials. These dual actions demonstrate the EU's expanding approach to economic diplomacy and sanctions.

Russia Sanctions: 19th Round

• Target: Four Chinese entities operating in the oil sector
• Breakdown of Targeted Entities:
  • Two Chinese oil refineries
  • One Chinese trading company
  • One entity involved in circumvention activities

This latest round of sanctions represents a strategic shift in the EU's approach to pressuring Russia. By targeting Chinese companies, the EU is signaling its determination to close potential loopholes in its sanctions regime and address the issue of third-country entities that may be assisting Russia in circumventing existing restrictions.

China Trade Measures

In a parallel development, the European Commission is preparing a list of trade measures to boost negotiating leverage with Beijing. This comes in response to China's announced plans to tighten controls on rare earth exports, which would require overseas exporters using even traces of certain Chinese-sourced rare earths to obtain export licenses.

Key points:

• China supplies about 70% of global rare earths, critical for electric vehicle batteries and defense manufacturing.
• EU trade chief Maros Sefcovic held talks with Chinese counterpart Wang Wentao without reaching agreement.
• The EU is discussing coordinated efforts with G7 nations to diversify away from Chinese supplies.
• Potential EU leverage points include aviation parts, deep ultraviolet lithography machines, and specialty steel products.

Significance and Implications

These dual actions by the EU highlight its evolving strategy in dealing with global economic challenges:

1. The Russia sanctions demonstrate the EU's commitment to maintaining pressure on Russia and closing sanctions loopholes.
2. The China trade measures show the EU's proactive stance in protecting its economic interests and supply chains.

Both moves could have significant implications for global trade relations, particularly affecting EU-China dynamics and the broader geopolitical landscape.

As these situations develop, it will be crucial to monitor the specific details of the sanctions and trade measures once they are officially announced, as well as any responses from the targeted entities, the Chinese government, and Russia.

Note: The specific names of the targeted entities and the exact timing of the sanctions implementation have not been disclosed in the current information available.