How China Uses Critical Materials to Divide the Transatlantic Alliance

Europe’s dependence on China for critical raw materials is no longer a theoretical vulnerability. In October 2025, China’s Ministry of Commerce (MOFCOM) laid out a concrete regulatory framework that shows exactly how this dependence could be transformed into strategic leverage. Although the measures were later suspended following high-level diplomacy, the regulation itself remains on the books and provides a clear template for future coercion. The question arises: if China pulls the plug, what would the October 2025 export controls on critical materials mean for Europe?

A Ready-Made Coercive Tool

On 9 October 2025, MOFCOM announced an expanded set of export controls covering selected medium and heavy rare-earth elements, rare-earth magnet products, and related processing equipment and technologies. The measures built on earlier restrictions introduced in April 2025 and were scheduled to enter into force on 8 November 2025.

Crucially, the regulation went beyond raw materials. It applied to processed components and introduced extraterritorial reach: foreign firms exporting products that contained Chinese-origin rare earths, or that were manufactured using Chinese rare-earth processing technology, would be required to apply for export licenses. License applications demanded detailed end-use statements, disclosures of downstream customers, and technical descriptions of how the materials were integrated into final products. Even minimal Chinese content could trigger jurisdiction, reflecting a near-zero de minimis threshold.

This framework would transform supply chains into regulatory choke points. What currently operates through commercial contracts would become subject to political approval by Chinese authorities. The power of the system lies not only in the ability to deny exports, but in the discretion to delay, condition, or selectively approve them.

An Administrative Panopticon Over European Industry

Beyond physical disruption, the October 2025 controls would create what can best be described as an “administrative panopticon” over Western industry and defense production. By centralizing licensing authority within MOFCOM and mandating extensive disclosure requirements, China would gain continuous, structured visibility into European industrial and military supply chains.

Under the October framework, export-license applications would require firms to provide granular information on end users, production volumes, technical specifications, and downstream integration. For defense-related items, this would often include identification of specific platforms or systems in which rare-earth magnets, gallium-based semiconductors, or specialized alloys are used. Over time, these filings would allow Chinese authorities to build a detailed map of Europe’s technological priorities and industrial bottlenecks.

This mechanism closely resembles intelligence harvesting through regulation. Rather than relying on espionage or cyber intrusion, Beijing would obtain sensitive information through legally mandated compliance. Each license request would function as a data point, and aggregated patterns would reveal which defense programs are scaling up, which production lines are under stress, and where NATO’s European members face single points of failure.

For NATO, this creates a structural asymmetry. While China’s own stockpiles, processing capacities, and allocation decisions remain opaque to allied intelligence services, European defense firms would be compelled to operate with near-total transparency toward Chinese regulators. This imbalance would undermine NATO’s efforts to improve collective supply-chain awareness under initiatives such as the Defense Production Action Plan and the Defense-Critical Supply Chain Security Roadmap, which aim to map vulnerabilities without exposing them to adversaries.

The panopticon effect would also have a chilling impact on industrial behavior. Knowing that every application signals strategic intent, firms may delay or conceal expansion plans, further complicating allied efforts to coordinate production surges in a crisis. In this sense, the October 2025 export controls would not merely monitor Europe’s industrial base – they would actively shape it, constraining NATO’s ability to plan, scale, and deter under conditions of strategic competition.

Transatlantic Divergence and the Politics of Dependence

The political consequences of implementing the October 2025 controls would be most visible at the transatlantic level. The United States has already moved decisively to reduce dependence on Chinese critical materials. Through a combination of the Defense Production Act, Inflation Reduction Act subsidies, and a firm 2027 target to eliminate Chinese-origin rare earths from US defense systems, Washington has signaled that supply-chain security is now a core national-security priority.

Europe has taken steps, but far more cautiously. EU initiatives on critical raw materials remain fragmented, slowed by regulatory hurdles, environmental permitting, and disagreements among member states. Unlike the US, Europe has not set binding deadlines for removing Chinese materials from defense supply chains, nor has it mobilized comparable financial support for domestic refining and processing capacity.

This divergence creates a wedge within the alliance. During the 30 October 2025 meeting between Xi Jinping and US President Donald Trump in Busan, China agreed to suspend global implementation of the new export controls for one year. The suspension – confirmed in a White House fact sheet on 1 November 2025 – underscored how Beijing views these measures as negotiable strategic assets, to be deployed or withdrawn depending on political context.

Europe was not at the table. The episode highlighted how asymmetrical dependence weakens Europe’s bargaining position and increases the risk that transatlantic unity could fracture under pressure.

Fragmented Resilience Inside Europe

Within Europe itself, the impact of Chinese export controls would be highly uneven. Analysis such as the MERICS China Audit 2025 has shown that several EU member states combine high economic exposure to China with low resilience in critical sectors, including materials processing and advanced manufacturing (notably Hungary, Slovakia, the Czech Republic, Greece, and parts of Southern Europe). These countries would be hit hardest by any disruption and would therefore face strong incentives to adopt more accommodative China policies.

This divergence would complicate collective European de-risking. States with lower exposure and stronger industrial buffers – such as Germany, France, the Netherlands, and the Nordic countries – may push for accelerated diversification and tougher political responses. More dependent economies, by contrast, may resist measures that risk provoking further Chinese restrictions. The result would be slower decision-making, diluted policy responses, and difficulty maintaining a unified EU stance.

These internal fractures mirror challenges already visible in NATO’s response. Frameworks such as the Defense Production Action Plan and the Defense-Critical Supply Chain Security Roadmap recognize the problem, but implementation remains uneven. Without coordinated timelines, shared standards, and pooled investment, Europe risks remaining the weakest link in the transatlantic effort to reduce strategic dependence.

A Fact-Based Warning

The October 2025 export-control framework is not a hypothetical scenario – it is a documented policy instrument that China has already designed and partially deployed. Its temporary suspension following high-level diplomacy does not diminish its significance. On the contrary, it demonstrates how effectively Beijing can use control over critical materials as leverage in negotiations.

If implemented, the measures would expose Europe’s industrial vulnerabilities, undermine defense readiness, and deepen political fragmentation both within the EU and across the Atlantic. The strategic lesson is clear: without faster, more coordinated action to reduce dependence on Chinese processing and refining, Europe risks becoming the pressure point through which transatlantic unity is tested in future crises.