Brussels to propose ‘dedicated’ tool to pull away from China, trade chief says

The European Union is intensifying its 'de-risking' strategy from China, with EU Trade Chief Valdis Dombrovskis announcing a forthcoming 'dedicated tool' to reduce single-supplier dependence in high-risk sectors. This initiative forms part of the EU's broader economic security agenda, aiming to bolster supply chain resilience and strategic autonomy without resorting to full 'decoupling'. Legal professionals must prepare for an evolving regulatory landscape, which is likely to involve enhanced scrutiny of supply chains, foreign investments, and technology transfers, building upon existing instruments such as the Anti-Coercion Instrument, Foreign Subsidies Regulation, and the Critical Raw Materials Act. The new tool is expected to introduce further compliance obligations and strategic considerations for businesses operating within or engaging with the EU market.

The European Union is poised to introduce a new legislative instrument aimed at reducing its economic reliance on China, particularly in strategically vital sectors. This development, articulated by EU Trade Chief Valdis Dombrovskis, signals a significant escalation in the bloc's 'de-risking' strategy, moving beyond mere rhetoric to concrete policy action. The proposed 'dedicated tool' is intended to wean high-risk sectors off single-supplier dependence, a clear response to geopolitical tensions and supply chain vulnerabilities exposed by recent global events.

This strategic shift is not about 'decoupling' from China entirely, but rather about fostering 'open strategic autonomy' and enhancing the EU's economic security. For legal practitioners, this announcement necessitates a deep understanding of the evolving regulatory framework. The new tool will likely interact with, and potentially expand upon, existing EU legislation designed to safeguard the Union's economic interests, creating new compliance challenges and strategic considerations for businesses engaged in international trade and investment with the EU and China.

The EU's pivot towards economic security and de-risking has been a gradual but determined process, formalized in its European Economic Security Strategy launched in June 2023. This strategy introduced a three-pillar approach—promote, protect, and partner—and identified four key risk categories: supply-chain resilience, critical infrastructure, technology security and leakage, and economic coercion. The overarching goal is to provide a robust framework for assessing and managing economic risks while preserving the EU's economic dynamism.

Several legislative instruments already underpin this strategy. The Anti-Coercion Instrument (Regulation (EU) 2023/2675), which entered into force on 27 December 2023, empowers the EU to take countermeasures against economic coercion by non-EU countries. The Foreign Subsidies Regulation (Regulation (EU) 2022/2560), applicable since 12 July 2023, allows the European Commission to investigate and remedy distortions in the internal market caused by foreign subsidies. Furthermore, the Critical Raw Materials Act (Regulation (EU) 2024/1252), effective from 23 May 2024, aims to secure a sustainable supply of critical raw materials by setting benchmarks for domestic capacities and limiting reliance on single third countries. A revised Foreign Direct Investment (FDI) Screening Regulation, adopted on 8 June 2026, strengthens national screening mechanisms and expands their scope to include intra-EU investments ultimately controlled by non-EU investors. These instruments, alongside the Dual-Use Regulation (Regulation (EU) 2021/821) governing exports of items with both civilian and military applications, form the existing legal arsenal for the EU's economic security.

The announcement of a 'dedicated tool' to reduce single-supplier dependence suggests either a significant enhancement of existing instruments or the introduction of a novel legislative act. Given the EU's existing comprehensive economic security toolbox, it is plausible that this 'dedicated tool' will serve to consolidate, streamline, and potentially expand the application of current regulations, or introduce specific sectoral measures. For instance, the Critical Raw Materials Act already sets a benchmark that no more than 65% of the EU's annual needs for each strategic raw material should come from a single third country. The new tool could extend such quantitative targets or similar diversification requirements to a broader array of 'high-risk sectors' beyond raw materials, such as semiconductors, artificial intelligence, quantum technologies, and biotechnologies, which have been identified as critical.

One potential legal avenue for this 'dedicated tool' could be an expansion of the EU's trade defence instruments (TDIs), which traditionally include anti-dumping, anti-subsidy, and safeguard measures. While TDIs primarily address unfair trade practices, a new tool could integrate supply chain resilience and strategic autonomy considerations more explicitly into their application, or even create a new category of 'economic security safeguards'. Alternatively, it could manifest as a framework regulation that mandates Member States to implement national measures to identify and mitigate single-supplier dependencies, similar to the approach taken with the FDI Screening Regulation.

The legal challenges associated with such a tool are considerable. Any new measure must be compatible with World Trade Organization (WTO) rules, which generally promote non-discrimination and free trade. The EU has historically adopted a 'WTO+' policy on trade defence, implementing stricter rules than necessary, which can sometimes make its instruments less effective. Furthermore, the implementation could face internal market implications, as Member States may have differing economic interests and levels of dependence on China, potentially leading to fragmented application or political resistance. The Corporate Sustainability Due Diligence Directive (CSDDD), for example, already imposes extensive due diligence obligations on companies regarding human rights and environmental impacts in their supply chains, and the new tool could build on this framework by adding economic security due diligence requirements.

Practitioners should also consider the potential for retaliatory measures from China, which has historically responded to perceived trade restrictions. The EU's Anti-Coercion Instrument is designed to deter and respond to such actions, but its effectiveness in a prolonged economic dispute remains untested. The new tool could also introduce new reporting obligations, supply chain mapping requirements, and potentially even direct intervention mechanisms, such as public procurement restrictions or investment limitations in specific high-risk areas, similar to those contemplated under the Anti-Coercion Instrument. The emphasis on 'high-risk sectors' suggests a targeted approach, requiring businesses to meticulously assess their exposure to single-country dependencies and diversify their sourcing and production strategies proactively.

The EU's commitment to a 'dedicated tool' for de-risking from China underscores a fundamental shift in its trade and economic policy, prioritizing resilience and strategic autonomy. For legal practitioners, this means navigating an increasingly complex regulatory environment where economic security considerations will heavily influence commercial decisions. Businesses must proactively audit their supply chains, particularly in identified high-risk sectors, to identify and mitigate single-supplier dependencies. This includes mapping critical inputs, assessing alternative sourcing options, and understanding the geopolitical context of their operations.

Practitioners should closely monitor the legislative developments surrounding this new tool, as its precise scope, enforcement mechanisms, and interaction with existing regulations will be crucial. Advising clients will require a comprehensive understanding of EU trade law, competition law, investment screening rules, and export controls, coupled with an appreciation for geopolitical risk management. Proactive engagement with regulatory bodies and a robust compliance framework will be essential to navigate the evolving landscape and ensure business continuity in an era of heightened economic security concerns.