The following is a translation of an article written by Viktória Lilla Pató, a research fellow at the Europe Strategy Institute of the University of Public Service, originally published on the Five Minutes Europe blog of Ludovika.hu.
An increasingly uncomfortable truth is emerging for Europe: its economic fate now depends largely on the balance of power between the United States and China. The trade and technology conflict between the two superpowers is not just about tariffs and export bans, but also about who controls the critical raw materials without which military technology systems, electric cars, batteries, solar panels, and even the hydrogen economy cannot function. In this game, Europe often appears not as an independent player but as collateral damage, bearing the consequences of others’ decisions while asserting its own strategic interests only partially.
A striking example of this was Beijing’s introduction of new export controls on rare earth metals and other critical raw materials in 2025, in response to US tariff increases. The restrictions were primarily aimed at the US, but it was European industry that felt the consequences of the tightening most acutely. China produces 90 per cent of rare earth metals, with more than nine-tenths of German imports originating in China, and a similar dependence can be observed in other major European economies as well.
As a result of US–China negotiations, there has been a temporary easing of tensions, with China suspending the most severe export restrictions and the United States also scaling back its sanctions—but only for a moment to breathe. The agreement is valid until the end of 2026 and is also politically fragile: if Beijing fails to fulfil its agricultural purchase commitments or Washington imposes new restrictive measures, the conflict could easily flare up again. Meanwhile, European companies are becoming increasingly aware of how vulnerable they are: they are waiting for export licenses, putting up with logistical delays, and facing the fact that the bureaucracy of a single country can bring entire production chains to a standstill.
‘Europe often appears not as an independent player but as collateral damage, bearing the consequences of others’ decisions’
The paradox of the situation is that while European Commission presidents, ministers, and commissioners are announcing their vision of a ‘more resilient Europe’, the continent is actually being granted respite or suffering further blows as a byproduct of deals between others, while self-sufficiency and control over the entire value chain are becoming more important in a global economy that is becoming increasingly fragmented.
China’s dominance over critical raw materials is not a new development: Beijing has consciously built up its extraction and refining capacities over the past two decades. It has a production share of over 50 per cent in 12 of the 15 most concentrated critical raw materials, and China is the indispensable centre not only for mining but also for processing rare earth metals. China accounts for 98.7 per cent of gallium production, 95 per cent of magnesium production, and 76.3 per cent of silicon production, which is the basis of modern electronics—this raw material superiority translates into direct geopolitical influence. Anyone who wants to leave this system must think in terms of years, even decades.
It is no coincidence that all this has forced the United States to take action. It is now clear to decision-makers in Washington that as long as Beijing controls critical raw material chains, technological and military superiority will remain conditional. This explains why large American companies, such as those in the automotive industry, are beginning to reorganize their supplier networks with the aim of ending their dependence on China for the most sensitive components within a few years. This movement also affects Europe, as most global value chains are organized around three poles: the industrial zones connected to the American, Chinese, and European markets.
While the trade war is raging in the northern hemisphere, the next chapter in the geopolitics of critical raw materials is being written in Latin America. Chile, Brazil, Argentina, and other countries in the region are rich in copper, lithium, nickel, cobalt, and other raw materials. In recent years, China has significantly strengthened its presence in the region through investments, infrastructure projects, agricultural imports, and diplomatic activities (BRICS+, China–CELAC forum). At the same time, the European Union is also seeking to accelerate its raw materials diplomacy by modernizing its agreements with Chile, Mexico, and the Andean Community and giving new impetus to the Mercosur agreement.
However, the competition is not just about who offers better prices or more favourable investment conditions. Latin American governments are increasingly looking for partners who not only buy minerals but also bring technology, create local added value, and help manage environmental and social risks. From this perspective, a real alternative is emerging between China’s rapid, state-coordinated model and the EU’s rule-based approach, which emphasizes the rule of law. Which model proves more attractive will largely determine where not only mines but also refineries, battery factories, and processing plants are built—and, with that, where permanent jobs and tax revenues are generated.
‘The next chapter in the geopolitics of critical raw materials is being written in Latin America’
COP 2025 is currently underway in Brazil, and the debate on critical raw materials has now entered the highest-level forum on climate policy. At COP30, participating countries—primarily at the initiative of the United Kingdom, with the support of the EU, Australia, and several African states—proposed that the conference’s final document explicitly address the sustainable extraction and governance of critical minerals. This is not merely a technical clarification: climate diplomacy has so far largely focused on emission reductions, the phase-out of fossil fuels, and climate finance issues. For the first time, the question of what we will use to build the technological infrastructure for the transition—and under what conditions—is sharply on the agenda.
African and Latin American countries are increasingly demanding that the concept of a ‘just transition’ should not only address the losers of the fossil fuel economy, but also the communities affected by mining. Zimbabwe, Africa’s leading lithium producer, has already included the issue of mining governance in its national COP position, while South Africa, Uganda, and Burkina Faso are speaking out on behalf of the least developed countries for global rules. Brazil links the critical issue of raw materials to the fight against illegal mining, corruption, and deforestation. The realization is simple but radical: if we decarbonize the energy system but at the same time destroy natural resources and local communities through uncontrolled mining, then we cannot really talk about a sustainable transition.
China is cautious in this debate for now: while it has a market share of around 70 per cent in the refining of most critical raw materials, according to estimates by the International Energy Agency, it did not take an active role in COP30 in tightening global mining regulations. Beijing’s focus remains on phasing out fossil fuels, transitioning carbon-intensive industries, and protecting its own manufacturing capacity. It is not difficult to see that a strict UN-level mining accountability framework would hurt the most in the short term those players that currently produce and refine the largest volumes.
Meanwhile, Europe is trying to address its energy, climate, and raw materials security dilemmas simultaneously. The Critical Raw Materials Act and the new RESourceEU initiative, announced by von der Leyen on 24 October 2025, aim to reduce the dependence on China over the next decade through mandatory stockpiling, diversified imports, support for new mining and processing projects, and chapters on raw materials embedded in trade agreements. The Commission has already identified dozens of ‘strategic projects’ and is seeking to speed up licensing procedures and support the continent’s critical raw materials extraction sites.
From the perspective of Hungary and the region, this is not an abstract geopolitical debate. The German automotive industry, investments in the battery and vehicle industries, and green technology supply chains are important for the Hungarian economy. If these chains falter due to critical raw materials, domestic jobs, tax revenues, and export performance will immediately feel the impact. At the same time, with the right research and development, innovation, and industrial policy strategies, the region can also play a role in those parts of the raw materials chain where the focus is not on mining but on knowledge-intensive processing, recycling, materials science development, or supply chain management.
‘Those who recognize this in time…will not be collateral damage in the geopolitical game, but active shapers of the new world economic order’
One of the big questions for the coming years will therefore be whether Europe, and Hungary within it, will be able to move beyond its role as a passive victim of other countries’ trade wars and instead build its own industrial and climate policies on a conscious, long-term raw materials strategy. Critical raw materials are not only the basic components of batteries and solar panels, but also one of the most important dimensions of 21st-century sovereignty. Those who recognize this in time and want not only to decarbonize but also to diversify and democratize supply chains will not be collateral damage in the geopolitical game, but active shapers of the new world economic order of the digital and green transition.
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