As the United States and China deepen their strategic rivalry over rare earth elements, a new and largely unacknowledged victim is emerging: Europe. While Washington accelerates efforts to secure its supply chains and Beijing strengthens control over strategic exports, the European Union finds itself stranded between the two powers — vulnerable, underprepared, and heavily dependent on both.
The conflict over rare earths — once the concern of defence analysts and industrial planners — has now evolved into a test of geopolitical resilience. And so far, Europe is failing that test.
Strategic Minerals at the Heart of Modern Industry
Rare earth elements — a group of 17 critical materials — are the hidden enablers of the modern economy. They are essential for smartphones, electric vehicle motors, wind turbines, and advanced weapons systems. Yet while deposits exist worldwide, China dominates the global refining and separation process, controlling over 90 per cent of supply.
That dominance is now being used strategically. Over the past year, Beijing has imposed export restrictions on key metals and magnet-making technologies, most recently expanding those limits to cover nearly all rare earths. Officially, these moves were justified on environmental grounds. In reality, European policymakers see them as economic weapons — a signal that China is willing to leverage its material power in response to geopolitical tensions.
Washington Moves, Brussels Hesitates
The United States has reacted with urgency. The Biden administration has poured billions into domestic processing projects, signed mineral agreements with allies, and framed rare earths as a national-security priority within its “de-risking” agenda.
Europe, by contrast, remains stuck in slow motion. The EU’s Critical Raw Materials Act, passed earlier this year, set ambitious targets for local sourcing and refining capacity but has yet to deliver tangible progress. As a result, Europe’s industrial base — from automakers to clean-energy manufacturers — faces potential disruptions this winter as supply chains tighten.
A Structural Weakness Exposed
Europe’s predicament reflects a long-standing structural flaw. For decades, the continent specialised in high-value manufacturing and design while outsourcing the extraction and processing of key inputs. That model thrived under globalisation; in an era of supply-chain weaponisation, it has become a liability.
The European automotive sector is particularly at risk. Permanent magnets made from rare earths like neodymium and dysprosium are indispensable for electric vehicle motors. Without them, production lines stop. Manufacturers in Germany and Italy are already reporting shortages and cost spikes. The defence industry faces similar exposure, with advanced radar and guidance systems reliant on the same materials.
Regulation and Reality Collide
Even when Europe recognises its vulnerabilities, action remains elusive. Environmental and planning regulations — among the most stringent in the world — make it exceedingly difficult to develop new mining or refining capacity. Promising projects in Sweden and Finland have become mired in opposition, bureaucracy, and litigation.
Europe’s rhetoric of “strategic autonomy” collides with local politics: communities oppose industrial development, and national governments are reluctant to override them. Unlike Washington, which can invoke national security to expedite projects, the EU’s consensus-driven structure diffuses authority across multiple levels. The result is paralysis.
An Uneven Contest of Strategy and Scale
The problem extends beyond red tape. It is also financial and strategic. The US combines state subsidies with clear industrial direction. China integrates rare earths into its long-term geopolitical planning. Europe, by contrast, continues to rely on market mechanisms that assume stable global trade — an assumption that no longer holds.
Investment in EU rare-earth refining and magnet production remains minimal, and the bloc has been slow to court alternative suppliers in Africa, Australia, and Latin America. Even when trade deals exist, they rarely include enforceable provisions on resource security. Meanwhile, Washington is locking in multi-decade supply agreements with the very partners Europe needs.
Mounting Industrial Anxiety
The consequences are already materialising. Chinese exports of rare earths fell by nearly one-third in September, even before the latest restrictions took full effect. European manufacturers are now stockpiling components, but smaller firms — particularly in renewable energy and electronics — lack the financial capacity to do so.
In Germany and Italy, industry groups warn that rare-earth shortages could derail electric vehicle production and slow Europe’s green transition. The EU’s twin goals of decarbonisation and digital leadership now appear threatened by a shortage of the very inputs required to achieve them.
Diplomatic Lag and Divided Priorities
Diplomatically, Brussels has tried to match Washington’s tone, calling for closer coordination on critical minerals. But unity within the bloc remains fragile. Some member states fear provoking Beijing, while others prioritise access to the Chinese market over long-term resilience. The EU’s collective response risks being too slow and too fragmented to influence the global race for resources.
A Crisis of Strategic Identity
At a deeper level, the rare-earth challenge exposes the limits of Europe’s post-Cold War industrial model. Built on global openness and environmental caution, the model prized efficiency over resilience. In a world where raw materials are instruments of power, that approach is increasingly untenable.
Europe’s aspirations to lead in electric mobility, renewable energy, and digital technology all rest on foundations it does not control. Without securing upstream access to critical minerals, its downstream industries risk becoming collateral damage in the new era of resource geopolitics.
Paths to Recovery — and Missed Opportunities
Some experts in Brussels argue that Europe can still regain ground. The continent’s strengths in recycling, materials science, and advanced engineering offer potential leverage. Scaling up the recycling of old magnets, investing in rare-earth substitution technologies, and co-financing processing plants could gradually reduce dependence. The European Commission has even floated the idea of a strategic rare-earth stockpile — a “metal reserve” akin to the oil storage systems of past decades.
Yet all of this requires capital, coordination, and political will — resources that Europe has historically deployed too slowly in moments of crisis.
The Strategic Cost of Inaction
For now, the momentum lies elsewhere. The US is commissioning new facilities in Texas and California; Australia is expanding mining output; and China continues to refine its global dominance. Europe remains largely on the sidelines — an observer in a contest that will shape the future of industrial sovereignty.
The irony is stark: the continent that leads in climate diplomacy and green innovation could see its clean-energy transition throttled by a shortage of the materials needed to power it.
In the emerging rare earth wars, control of resources is power. Europe’s dependence on others — and its hesitance to act decisively — risks turning it from a global industrial leader into a strategic bystander. Unless it matches its rhetoric on autonomy with real investment and reform, the arithmetic of supply and demand will decide its fate. By that measure, Europe is already losing.
