Experts warn that the escalation exposes Europe’s dependence on critical Chinese inputs such as gallium, germanium, and rare-earth elements. Photo: EFE.

China imposed immediate export controls on 14 European Union defense and technology firms this Tuesday, after the European Union included Chinese companies in its 21st package of sanctions against Russia.

The retaliatory measures target critical industrial and strategic sectors. Among the affected entities, Beijing blacklisted the Italian electric motor manufacturer Lafert, the French drone producer Cavok UAS, and the major German defense manufacturer Rheinmetall. The restriction list also includes the Dutch shipbuilder IHC Merwede, operating under the brand Royal IHC, and the German coating material specialist Sindlhauser Materials.

Under these new rules, Chinese suppliers and operators are strictly prohibited from providing these European firms with dual-use goods.

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These items represent technologies and materials with both civilian and military applications. Furthermore, China banned any foreign organization or individual from transferring or facilitating Chinese-origin dual-use items to the blacklisted corporations.

The Ministry of Commerce of China justified the regulatory action as a necessary step to protect national security. Authorities in Beijing emphasized their sovereign right to safeguard strategic interests and fulfill international obligations regarding non-proliferation. This response came after Bruselas labeled Chinese entities as suppliers to the Russian military in its 21st sanctions package.

This defensive trade move highlights the limited leverage that European policymakers possess when attempting to isolate major global economies. While the European Union continues to align its foreign policy with unilateral sanctions, Beijing has demonstrated its capacity to respond with precise countermeasures that directly affect Europe’s leading industrial conglomerates.

In a major trade escalation, China has imposed immediate export restrictions on dual-use technology targeting 14 European companies.

China’s Ministry of Commerce stated the decision aims to safeguard national security, effectively cutting off these entities from Chinese… pic.twitter.com/YXv8XZvhGM

— Al Mayadeen English (@MayadeenEnglish) July 28, 2026

Trade Deficit Widens

This legislative confrontation escalates an already volatile economic relationship between Beijing and Bruselas. According to official data, the EU trade deficit with China reached 359 billion euros (approximately 418 billion dollars) in 2025. This figure represents an expansion of almost 15% compared to the previous year, highlighting the massive asymmetry in bilateral trade.

The trade gap is more than double the deficit registered in 2019, before the global disruptions of the Covid-19 pandemic. In 2025, Chinese exports to the European Union reached 560 billion euros (about 650 billion dollars). This upward trend has persisted despite efforts by European authorities to decouple their economies from Asia.

Conversely, European exports to the Asian giant experienced a significant contraction. Throughout 2025, European shipments to China fell to just under 200 billion euros (approximately 232 billion dollars). This drop accentuates the vulnerabilities of European manufacturers, who are increasingly cut off from lucrative Eastern markets.

Supply Chain Risks

Industry experts warn that this confrontation exposes Europe’s severe vulnerability regarding key industrial inputs. The European continent remains deeply dependent on Chinese supplies of critical minerals like gallium, germanium, and rare earths, which are indispensable for manufacturing advanced electronics, semiconductors, and renewable energy technologies.

In response to growing European hostility and potential tariffs, China is diversifying its economic presence through nearshoring strategies. Chinese enterprises are boosting capital investments in neighboring countries with preferential trade terms, such as Morocco. This North African nation maintains a free trade agreement with the European Union, potentially allowing Chinese firms to bypass trade barriers.

The current diplomatic standoff signals a potential full-scale trade war. Reports indicate that Bruselas is preparing to issue official warnings to European businesses regarding these imminent trade risks. However, retaliatory measures from Beijing prove that the European bloc faces immense economic costs if they continue applying unilateral sanctions.

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