On July 22, 2026, the European Union (EU) declared dual use sanctions against 14 entities in China over their alleged links to Russia, to which China responded the following day, with sanctions against 14 entities in the EU, including defence sector heavy-weights, such as Germany’s Rheinmetall, France’s Cavok UAS and Lafert of Italy. Under the export control law of June 2025, the Chinese Government is authorised to ban producers of sensitive technologies and rare earths from exporting to designated countries.

The new EU sanctions are certain to damage European economies more than the other way around. As is well known, chips and other electronic parts imported from China are a crucial component of European high-tech products, including in the automotive industry. It gives the Chinese obvious leverage on this issue. The attempt to ignore it back in November 2025 led the Dutch Government to back down after it had seized the Chinese-owned company, Nexperia, under national security pretexts. The decision had to be reversed several weeks later because China had responded by stopping all deliveries to Nexperia, a company with a dominant role in production for the entire European automobile sector. After the Dutch backpedalling and the reinstatement of Chinese ownership of the company, deliveries were resumed to Nexperia.

If Brussels sticks with its July 22, 2026 sanctions against China, the defence industry in particular, which has no substitutes for Chinese deliveries, notably rare earths, will suffer badly. It is rumoured that the sanctions cabal won the upper hand over those warning against trade wars, once German Chancellor Friedrich Merz distanced himself from the promises made during his visit to Beijing in February 2026, declaring in public that he could and would support a tougher EU course against the Chinese. It is said in Brussels that Germany’s positions make the difference in EU-China matters.

In sum, Brussels has thrown yet another boomerang. The EU will either undermine its own rearmament policy by blocking the strategic minerals it requires or give in one way or another, such as the Dutch did in the Nexperia affair. As for German industry, it has repeatedly stated that trade wars must be avoided and alternatives found that serve both sides. One such alternative is the decision by Ford’s plant near Valencia, Spain to start production of cars based on technology of the Chinese automaker Geely, which will take over 33% of the plant’s shares in a new joint venture with Ford, which will maintain 66%. This would circumvent EU threats of tariffs against Chinese car imports. Creating joint EU-China investment/production ventures in the rare earths sector may also be a solution, by scrapping the July 22, 2026 sanctions in a constructive way to benefit both sides.

This article was first published in Executive Intelligence Review (EIR) Strategic Alert weekly newsletter (Volume 40, No. 31) on July 30, 2026.

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Published by Koushik Das

Koushik Das (born on May 16, 1976 in Kolkata) is a career journalist. Based in the Indian capital of New Delhi, Koushik writes mainly about foreign policies and current geopolitical issues, and rarely about other topics. His own political ideas are highly influenced by Antonio Gramsci, Louis Althusser, Michel Foucault, Michael Oakeshott and others. English philosopher and political theorist Oakeshott (Dec 11, 1901-Dec 19, 1990) says that “in political activity, men sail a boundless and bottomless sea. There is neither harbour for shelter nor floor for anchorage, neither starting-place, nor appointed destination. But we have to keep afloat”. (Rationalism in Politics, 1962) As a student of Political Science, Koushik loves to share his views on issues, which have great impacts on his thought process (and also on India, South Asia and of course on the global community), with his readers through his website – Boundless Ocean of Politics. By doing so, he tries to keep himself afloat. You will find some of his articles in https://inserbia.info/today/ (https://inserbia.info/today/author/kou_das13_i/), as he has been trying to assess the global geopolitics since 2003. You can also mail him at kousdas@gmail.com View all posts by Koushik Das