US–China rivalry after 2025: plausible scenarios and Europe’s place

Axis of competition: technology, critical raw materials, supply chains.

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Contents

  1. Executive summary
  2. Intentions and policy instruments
  3. Four realistic scenarios (2025–2030)
  4. Bottlenecks most relevant for Europe
  5. EU policy tools and frameworks
  6. Opportunities for Europe
  7. Risks for Europe
  8. EU priorities (next 12–24 months)
  9. What to monitor (early-warning indicators)
  10. Shortest conclusion

Executive summary

After 2025 the US–China rivalry enters a phase of managed separation: both powers reduce mutual exposure in dual-use technologies, critical raw materials and enabling toolchains, while cooperating selectively where full decoupling would be prohibitively costly. The European Union (EU)—as a large regulatory market and node of advanced industry—becomes a key arena for indirect effects. The biggest consequences concern semiconductors, rare earth elements (REE), active pharmaceutical ingredients (API), and components for renewables and automotive. The window for meaningful EU strategic autonomy is 2025–2027 (ramping CRMA—Critical Raw Materials Act—and NZIA—Net-Zero Industry Act).

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1) Intentions and instruments

China. Drive for technological self-reliance by 2035 and “world-class” armed forces before 2027. Priorities: domestic capability in chips, EDA (Electronic Design Automation), lithography equipment, AI systems; tighter control over critical metals chains (incl. more discretionary export licences on germanium, gallium, graphite and selected REE products).

United States. Since Oct 2022, BIS export-control regimes limit China’s access to advanced chips, semiconductor equipment and design tools; subsequent updates refine chip thresholds and tool classes. The Netherlands curbed part of ASML tool exports (incl. selected DUV systems) to China in early 2024; restrictions continue with adjustments.

Region/ASEAN. ASEAN’s role grows as a “third lane” for investment and trade; the ACFTA 3.0 upgrade strengthens chapters on the digital and green economy and supply-chain resilience.

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2) Four realistic scenarios (2025–2030)

Scenario A — “Managed separation” (base case)

“High fence” around the most advanced technologies with tactical relaxations where cooperation pays. In the EU the logic of “de-risking, not decoupling” persists. This creates windows of relative stability to expand capacity (chips, batteries, automation) but without durability guarantees.

Scenario B — “War of minerals and code”

Coordinated escalation: China widens restrictions on raw materials and magnet intermediates; the US and allies tighten controls in semiconductors and EDA. Costs jump in defence, energy (wind, grids) and automotive.

Scenario C — “Bifurcation plus”

Supply chains split into two blocs with a rising role for the Global South (incl. ASEAN) as a flexible corridor for investment and trade. The EU balances cheaper Asian tech (EVs) with market-defence tools and domestic industrial policy.

Scenario D — “Long grey-zone crisis” around Taiwan

Low-threshold pressure: cyberattacks, short blockades, firepower demos. Critical: diversification of TSMC capacity in Arizona and Dresden, stockpiles and continuity plans. The EU needs emergency mechanisms for chips/automation in critical sectors (industry, health, energy).

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3) Bottlenecks most relevant for Europe

REE. China’s dominance in processing and controls over some categories/intermediates (NdFeB magnets, alloys, powders) raise price and logistics risk.

Semiconductors and EDA. Persistent risk of top-tier chip and lithography restrictions; the EU’s resilient “minimum” includes foundry projects, OSAT, packaging/test, analogue/MCU niches, photonics.

Pharma (API). Large import share of APIs and inputs from Asia makes Europe’s healthcare system vulnerable to disruptions.

Energy & automotive. Dependencies on renewables components and batteries/permanent magnets are critical during trade/tech escalations.

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4) EU policy tools and frameworks

CRMA (Critical Raw Materials Act). By 2030: ≥10% extraction, ≥40% processing and ≥25% recycling in the EU for strategic raw materials; <65% dependency on a single supplier at each stage.

NZIA (Net-Zero Industry Act). Target: by 2030 around 40% of demand for net-zero technologies made in the EU; faster permitting and resilience-based incentives.

ACI (Anti-Coercion Instrument). Tool to respond to economic coercion from third countries (retaliatory tariffs, restricted market access, procurement).

Chip initiatives. Support for foundry/OSAT (e.g., Dresden, Poland), packaging/design, integration with automotive/industrial chains.

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5) Opportunities for Europe

Re-industrialisation 2.0. Use NZIA to build capabilities in clean tech (electrolysers, turbines, power electronics, storage) and in semiconductor/photonics niches.

Raw-materials security. Accelerate mining, processing and recycling projects for REE and battery metals; grow secondary markets for magnets and catalysts.

Geographic diversification. Durable “friend-shoring” channels with Australia, Canada, Chile, ASEAN partners and Latin America.

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6) Risks for Europe

Ricochet effects. US–China escalations translate into unpredictable deliveries/prices, hitting European wind capacity, automotive, aerospace and defence.

Pharma. Persistent API import dependence threatens public health; even short disruptions cause shortages of basic drugs.

Price pressure and trade disputes. Heavier use of trade-defence and countervailing tools can raise the cost of the green & digital transition.

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7) EU priorities (next 12–24 months)

CRMA in investment mode. Fast-track permits for mining/processing/recycling, demand guarantees and long-tenor finance (EIB).

Medicine security. Map API origin, build buffers, incentivise EU production—prioritise items on the critical list.

Friend-shoring contracts. Long-term deals for raw materials/components with high-compatibility partners; bring ASEAN in as a diversification pillar.

Regulatory resilience. Readiness to use ACI and targeted trade-defence tools without cutting off critical components during the transition.

Chips in Europe. Support foundry/OSAT (e.g., Dresden, Poland), align procurement with automotive/industrial, coordinate strategic sourcing.

Circular economy for REE. Magnet recycling and metal recovery from industrial waste; standards for secondary-material quality.

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8) What to monitor (early-warning indicators)

US export controls & China licences. Scope for chips, EDA, equipment vs. licences on REE, gallium, germanium, graphite and magnet components.

Scaling of sodium-ion batteries (Na-ion). Potential material-mix shift in e-mobility and storage (less pressure on Li/Co).

ASEAN & ACFTA 3.0. Real flows of investment and trade that can “route around” part of the restrictions.

Geopolitics around Taiwan. Frequency of grey-zone disruptions (IT, logistics, cyber) and progress in TSMC diversification (US/EU).

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9) Shortest conclusion

The most likely path is managed separation with periodic spikes in the “war of minerals and code”. For Europe, it is a race against time: if 2025–2027 bring real CRMA/NZIA execution and pharma resilience, the risk premium embedded in energy, medicines, defence kit and green tech falls. If not, the EU pays a growing “uncertainty tax”.

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