The European Commission plans to introduce a new set of so-called “risk reduction” measures for supply chains this December, aiming to force companies to reduce their dependence on Chinese supply chains. However, the proposed measures have sparked widespread doubts among European businesses.
The European Commission is preparing to introduce three new tools. Although it does not directly mention China, the overall goal is to reduce dependence on China and enhance the EU's ability to counter trade disputes.
According to a report in The South China Morning Post on the 29th, a tool called 'DiversifyEU' may force key industry companies to expand their supplier base. Specific measures include imposing tariffs and linking supply chain diversification with public procurement contracts and government subsidies.
The two tools involve compensating enterprises that have suffered trade retaliation, and allowing the EU to swiftly close their markets for countries implementing what is referred to as “market distortion” or "economic coercion".
However, the EU's proposal has yet to be implemented, and it has encountered opposition from many well-known European companies and industry associations. They are concerned that excessive market intervention by Brussels could not only increase operating costs but also force companies to make choices that are practically impossible to implement.
The European Automotive Industry Association (ACEA) pointed out in its feedback to the European Commission regarding the "DiversifyEU" policy: "In areas such as rare metals, magnets, battery materials, displays, and some semiconductors, there are hardly any or no alternative supply bases available. Europe also lacks the industrial ecosystems necessary to establish these supply chains."
Policy goals should be aligned with reality. Europe is unable to achieve China's cost levels and cannot completely break free from dependence on China, nor is there a need for that. ACEA stated.
On October 26, 2026, local time, in Twickau, Saxony, Germany, at the Volkswagen Moselle plant, a new electric vehicle was being loaded onto a truck. Visual China
The organization emphasizes that supply chain diversification must be based on reality. Only when alternative suppliers are commercially viable and meet relevant requirements can supply chain diversification be successful. “If the foundation for alternative supplies has not been established yet, forcing companies to achieve diversification is impossible to succeed.”
The German Industry Federation (BDI), which generally supports the EU’s more stringent policies towards China, also expresses skepticism about the EU’s plans. In its feedback, the organization explicitly opposes the introduction of new reporting obligations and mandatory requirements, and believes that tariffs are not an appropriate tool to promote supply chain diversification.
Volkswagen’s commercial vehicle manufacturer Traton also stated that “Europe cannot simply create alternative supply sources out of thin air through regulatory measures.”
The company believes that the EU should first establish a large-scale, standard-compliant, and competitive alternative supply system, before considering implementing restrictive or mandatory measures.
Finnish telecommunications company Nokia also issued a warning that imposing trade restrictions, banning components, or raising costs through tariffs without having alternative suppliers available will only harm the interests of reliable suppliers and increase the costs of critical digital infrastructure.
The industry organization Orgalim, representing the European technology industry, points out that forcing companies to change suppliers also presents a practical problem: even if seemingly suitable alternative suppliers are found, it is not guaranteed to reduce fundamental supply chain dependence because these alternatives may still rely on products or materials provided by the original supplier countries.
Besides industrial enterprises, European retail businesses are also worried about paying a price for this.
Swedish furniture retail giant IKEA warns: "Increasing costs and a decline in supply reliability will make it more difficult to maintain affordable prices and sufficient supply, making it challenging to continue meeting the needs of a wide range of consumers."
Currently, it is emphasized that companies do not neglect supply chain risks. They have established networks of suppliers in various regions. However, cultivating new suppliers who can meet the requirements of production scale, product quality, and cost standards requires significant time and investment.
The South China Morning Post pointed out that despite widespread doubts from the European business community, political support for the related measures continues to increase. At the European Council summit held in Brussels this month, when European Commission President Jean-Claude Juncker introduced his package of economic policies, none of the 27 EU member states raised any objections.
Regarding the EU's recent efforts to promote a "de-risk" approach to China, the Chinese side has responded multiple times.
On October 16, Mao Ning, a spokesman for the Chinese Ministry of Foreign Affairs, responded to reports that the EU is preparing new trade measures to reduce its trade deficit with China. She stated that Sino-EU economic and trade relations are essentially based on mutual benefit and win-win outcomes, and that both parties can resolve their differences through dialogue. She expressed hope that the EU would adhere to its commitments of openness and freedom, as well as WTO rules, avoid introducing protectionist and discriminatory policies, and work together with China to maintain the stability and smooth operation of global supply chains.
In June this year, when responding to the phenomenon that European companies generally do not choose to reduce risks in China, Mao Ning also pointed out that an increasing number of European companies are choosing to deepen their presence in China and expand their business there. This in itself is the strongest response to what is called “reducing risks.”
"China-EU economic and trade cooperation stems from common interests. Essentially, it is the result of the combined effects of comparative advantages and market competition. Complementary advantages are not risks, nor is the integration of interests a threat."
Mao Ning emphasized that trade protectionism goes against economic laws and harms both parties. He hoped that the European side would view the China-EU economic and trade relations objectively and rationally, work with China to reduce the list of issues, expand cooperation, and achieve mutual benefit and win-win results.
