Europe spent decades promoting open markets as a path to shared prosperity. Trade barriers fell, production networks stretched across continents, and companies moved factories to places where costs were lower. The expectation was simple: economic integration would make nations richer, more efficient, and less likely to clash. But as EU leaders debate tariffs on Chinese electric vehicles, investigate industrial subsidies, and seek new trade corridors, an uncomfortable question is taking shape. Did Europe gain efficiency at the cost of losing control over its own economic future?
The debate is no longer limited to economists or trade experts. It touches industries that employ millions of people, the security of supply chains, and Europe’s ability to make political decisions without worrying about whether key materials or technologies are controlled elsewhere. What appeared for many years to be a successful model of globalisation is now being reassessed. Slowly, and perhaps later than some would argue, Europe is beginning to ask whether sovereignty depends not only on laws, borders, and institutions but also on the ability to manufacture, innovate, and maintain industrial strength at home.
What makes this reassessment more urgent is China’s extraordinary rise as a manufacturing power. China now accounts for around 30 percent of global manufacturing value added, making it the world’s largest manufacturing economy. Its influence reaches far beyond traditional consumer goods. Chinese companies and state-backed industries dominate many of the sectors expected to shape economic growth over the coming decades.
Beijing controls about 90 percent of global rare earth processing capacity. These minerals are essential for electric vehicles, wind turbines, military equipment, semiconductors, and advanced electronics. China also produces more than three-quarters of the world’s lithium-ion batteries and remains a major force in the solar panel supply chain. Such dominance did not emerge by chance. It was built over many years through targeted subsidies, long-term industrial planning, favourable financing, and strong state support for strategic sectors.
European officials increasingly argue that their companies are not competing only with private Chinese firms. In many cases, they are competing with the priorities of the Chinese state itself. This concern has become particularly visible in the automotive industry. Chinese electric vehicle exports to Europe have risen sharply in recent years, prompting the European Commission to open anti-subsidy investigations and introduce additional tariffs on some manufacturers.
European policymakers say these measures are necessary to protect an industry that supports millions of direct and indirect jobs. Critics, however, note that tariffs can only provide temporary relief. The deeper issue is whether Europe still possesses the industrial capacity needed to compete in sectors that will define future economic growth. Electric vehicles, batteries, artificial intelligence equipment, renewable energy technologies, and advanced manufacturing systems are no longer simply commercial products. They have become instruments of economic influence and strategic leverage.
China’s growing role has therefore exposed a difficult reality. Europe is not just worried about imports becoming cheaper. It is worried about becoming dependent on technologies, materials, and production chains that are increasingly concentrated outside its borders. That dependence may not matter during periods of stability. But recent events have shown that stability cannot always be assumed.
The COVID-19 pandemic disrupted shipping networks and highlighted shortages in medical supplies. Russia’s invasion of Ukraine sent energy prices soaring across Europe. Rising tensions between China and Western countries have created uncertainty over access to critical minerals and industrial inputs. Trade, it turns out, is not always politically neutral. Infrastructure, supply chains, and manufacturing networks can also become tools of geopolitical influence.
Yet focusing solely on China’s rise risks overlooking another important part of the story. Europe’s vulnerabilities were not imposed from outside. Many of them developed through decisions made within Europe itself.
For years, manufacturing was often treated as a mature sector that would continue operating without significant political attention. European governments devoted substantial energy to regulatory frameworks, financial services, environmental targets, and market governance. These priorities reflected important social and environmental goals, but industrial competitiveness sometimes appeared to receive less sustained focus.
At the same time, companies faced rising energy costs, lengthy permitting procedures, increasing compliance requirements, and uncertainty over future industrial policies. Businesses repeatedly warned that production costs in Europe were becoming less attractive compared with those in Asia and North America. The warnings were heard, but not always acted upon quickly.
Germany offers perhaps the clearest example. Long regarded as Europe’s industrial engine, Germany has faced growing pressure since the energy crisis triggered by the war in Ukraine. Energy-intensive sectors such as chemicals, steel, fertilisers, and heavy manufacturing continue to struggle with costs that remain significantly higher than those faced by competitors in several other regions. Major firms, including BASF, have reduced investments at home while expanding operations abroad, citing concerns about competitiveness and operating expenses.
These developments raise broader questions about strategic autonomy. Can Europe remain economically independent if key industries gradually lose ground? Can political leaders make fully sovereign decisions if critical technologies, batteries, rare earth materials, and manufacturing capacity depend heavily on foreign suppliers?
Europe increasingly appears to recognise that sovereignty cannot rest only on legal institutions or diplomatic influence. Economic strength matters too. Countries that cannot produce enough of what they consume, or that lose leadership in critical industries, may eventually find their political choices shaped by external pressures.
This changing understanding is influencing European trade policy. The growing interest in the India–Middle East–Europe Economic Corridor reflects more than enthusiasm for a transport project. It signals a desire to diversify supply chains, deepen ties with emerging economies, and reduce excessive dependence on any single country.
Supporters see diversification as a form of insurance. New trade routes may not replace existing supply chains, but they can reduce risks and provide alternatives during periods of disruption. Still, diversification alone cannot solve Europe’s structural problems. New corridors cannot compensate for declining industrial capacity at home.
Europe’s challenge, then, extends beyond responding to China’s success. It requires addressing issues that businesses have highlighted for years: high energy prices, slow approval processes, underinvestment in strategic sectors, and policies that sometimes place production concerns behind regulatory ambitions. Rebuilding industrial competitiveness will likely demand long-term planning, targeted investment, and political choices that accept manufacturing as a strategic asset rather than merely an economic activity.
The debate unfolding in Brussels today is therefore about much more than electric vehicles or tariffs. It is a debate about assumptions that guided European economic thinking after the end of the Cold War. The belief that markets alone would guarantee resilience is being questioned. Competitors such as China pursued industrial dominance through state planning, while the United States has increasingly embraced industrial policy through programmes such as the Inflation Reduction Act and the CHIPS and Science Act.
Europe now faces a moment of reassessment. The key question is not simply how to contain China’s rise or shield domestic producers from competition. It is whether Europe can strengthen the foundations of its own productive economy. Trade measures may ease immediate pressures. But Europe’s long-term position will depend less on defensive actions and more on its ability to innovate, manufacture, and invest in industries that shape future prosperity.
The answer will determine more than economic growth figures. It will influence whether Europe can act confidently in a world where power is measured not only by military capabilities or diplomatic influence, but also by the ability to build, supply, and sustain the technologies that modern societies increasingly rely on. In that sense, Europe’s debate over China is becoming a debate about Europe itself — and about what sovereignty means in an era where economic power and political independence are becoming harder to separate.
