Caught in the Middle: Industrial Power, Strategic Minerals, and Europe’s Hard Geopolitical Choices
If Europe intends to stay the course by greening and digitalizing in ways that serve its economy, principles, and citizens, it must move beyond stockpiling and resilience building alone. A commentary by Sophia Kalantzakos
On 5 February 2026, IEP Bocconi, in collaboration with Egea, hosts “Rare Earths & Geopolitics: Hard Choices for Europe” in Milan (Via Bocconi 12, 17:30–19:00), featuring Sophia Kalantzakos in conversation with Daniel Gros (IEP Bocconi) and Alberto Prina Cerai (ISPI). More information and registration link here.
The convergence of the green and AI transitions has pushed rare earths and other critical minerals to the center of the US-China rivalry. What was once framed as a technical challenge of supply security has become a structural question of industrial power and geopolitical realignment.
For the EU, strategic autonomy is now intrinsically linked to a material problem rooted in access to minerals, control over supply chains, and the ability to sustain competitive manufacturing in a coercive geoeconomic environment.
A carefully staged moment at the June 2025 G7 summit captured this shift. European Commission President Ursula von der Leyen presented a rare earth permanent magnet produced in Estonia, manufactured by a Canadian firm supported by EU funding and sourced from Australian inputs rather than China.
Europe showed that it was able to reduce exposure to geopolitical risk and rebuild industrial capacity essential for electrification, renewables, and advanced technologies. It would reduce the China risk and work more closely with Allies. A few months later, this assumption is being reconsidered.
In the past decade, critical minerals emerged as indispensable for defense, transport, energy, and digital infrastructure.
China’s dominance across mining, refining, and downstream manufacturing reflected decades of industrial policy, strategic financing, and sustained engagement with resource producing regions. While China took a long-term strategic view, Europe and the US assumed that globalization would guarantee access. It was a strategic mistake.
The trade wars, launched during Trump’s first term in 2018, marked the shift from globalization to hypercompetition.
Although the Biden administration sought to embed industrial policy within climate objectives and alliance management, measures such as the Inflation Reduction Act generated friction by privileging domestic production and excluding partners. Supply chains fragmented, industrial policy returned, and interdependence was increasingly treated as vulnerability rather than mutual gain.
Trump’s return to office in 2025 ushered in an openly transactional America first approach.
The US withdrew from the Paris Agreement, rolled back green subsidies, imposed tariffs on rivals and allies alike, and securitized access to critical minerals in the name of defense and artificial intelligence.
Threats of purchasing or taking over Greenland and its mineral resources by force, if necessary, are now accompanied by tariffs directed at those opposing US actions. The turn of events has eroded the last kernels of trust and irreparably damaged the transatlantic relationship while revealing Europe’s exposure to unilateral US geoeconomic pressure. They have also prompted a necessary re-evaluation of global EU partnerships.
Complicating matters further, Washington has deprioritized the green transition while continuing to demand control over mineral supply chains. For Europe, this contradiction matters.
If mineral securitization is increasingly detached from climate-driven industrial transformation, Europe must think more holistically about how to build its own supply chains beyond what was initially conceived as an effort to curb China’s dominance.
China, in contrast, has doubled down on electrification and digitalization and is positioning itself as the first electric and digital superpower. It has also recalibrated its diplomatic posture.
In a notable inversion of postwar roles, the United States has shifted toward ad hoc bilateralism, while China increasingly presents itself as a convener, particularly for the developing world. Platforms such as FOCAC (Forum on China-Africa Cooperation), CELAC (Community of Latin American and Caribbean States), and new initiatives on green minerals and global governance signal Beijing’s intent to shape norms and expectations in a fragmented system.
This realignment is unfolding alongside a deepening governance vacuum. As WTO rules weaken and multilateral coordination erodes, the most powerful buyers prevail. Regulatory standards are diluted, transparency declines, and supply chains are shaped through asymmetric bilateral bargains.
As a result, the developing world risks being reduced to an extraction geography, absorbing environmental and social costs without capturing durable industrial gains.
China retains a decisive advantage across mining, refining, and manufacturing.
Although the EU continues to champion the green and digital transitions and has begun to reorient its economic strategy through initiatives such as the Competitiveness Compass, it is still playing catch-up in sectors where scale, speed, and integration matter most.
Clearly, Europe cannot and must not compete with China by excluding it. Nor can it afford a strategy that confines China to the role of external supplier of finished products. If the EU is serious about restoring industrial power, it must bargain more forcefully for Chinese capital, technology sharing, and joint ventures on European soil, shifting the relationship from dependency to co-production.
At the same time, Europe must widen its strategic geography. Deepening engagement with MERCOSUR, Africa, and Asia will be decisive to source raw materials, but also in recognition of a changed world, where other powers now have agency and economic muscle.
Beyond diversification and domestic capacity, therefore, Europe should advance a more coordinated governance response. A multilateral mechanism housed within an institution such as IRENA, the IEA, or the United Nations, with formal input from regional organizations like the African Union, could help align investment with sustainability goals, coordinate midstream capacity, and improve transparency across supply chains. China cannot be the sole power championing global stability and inclusion.
If Europe intends to stay the course by greening and digitalizing in ways that serve its economy, principles, and citizens, it must move beyond stockpiling and resilience building alone. It should accept the dissolution of its strong transatlantic partnership and deploy its regulatory, convening, and diplomatic power to stabilize interdependence, defend open commerce, and uphold international law.
The outcome will depend on how decisively the EU accelerates, how strategically it bargains, and how effectively it reshapes the terms of interdependence in a world where mineral competition has become one key manifestation of geopolitical rivalry that ignores the climate challenge and produces conflict for geoeconomic gains.
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
