EU and Japan Deepen Critical Minerals Alliance as Chinese Supply Risks Mount

Brussels Talks Put Industrial Security First

The European Union and Japan are stepping up cooperation on critical minerals, batteries and semiconductors as Chinese export controls sharpen concerns about the materials needed to keep factories running. At their seventh High-Level Economic Dialogue in Brussels in early May 2026, officials reviewed an alliance intended to reduce dependence on supply chains dominated by a single country.

European Commission Executive Vice-President Stephane Sejourne and Trade Commissioner Maros Sefcovic met Japanese Trade Minister Ryosei Akazawa and State Minister for Foreign Affairs Iwao Horii. Their discussions covered the Japan-EU Competitiveness Alliance, launched at a bilateral summit in July 2025, and cooperation across critical minerals, batteries, defense industries, hydrogen, offshore wind and semiconductor supply chains.

China was not named throughout the diplomatic exchanges, but its concentration of mineral processing and refining capacity was central to the concerns. Brussels and Tokyo increasingly view supply chains as a matter of national and economic security, alongside their traditional role in making production cheaper and more efficient.

Akazawa also raised a concern about European policy. The European Industrial Accelerator Act, proposed in March, could favor products manufactured within the EU. Tokyo fears that preferences for European production could put Japanese companies at a disadvantage and weaken the industrial cooperation the two partners want to expand.

The meeting brought together two pressures facing both economies: securing essential supplies against disruption and protecting domestic industry against intense international competition. Agreement on those goals still leaves difficult decisions about which companies receive support, where factories are built and how much governments should pay.

As of May 10, the talks had advanced cooperation, but neither side had announced a timetable for replacing its dependence on Chinese supplies.

From Davos Commitments to Joint Projects

Akazawa and Sejourne had already discussed critical minerals at the World Economic Forum in Davos in January. They reaffirmed their commitment to accelerate cooperation between governments and businesses and promised financial support for joint ventures.

By the Brussels meeting in May, further Chinese export controls and growing anxiety about rare earths and battery materials had increased the pressure to turn those commitments into industrial projects. Officials reviewed progress under the Competitiveness Alliance and considered where cooperation should go next.

The sequence shows how several strands of the relationship have moved toward economic security:

• 2018: The EU and Japan concluded their Economic Partnership Agreement and Strategic Partnership Agreement, focused largely on tariffs and regulatory alignment.
• 2019: The Economic Partnership Agreement entered into force.
• 2022: Japan passed its Economic Security Promotion Act, and the EU-Japan Digital Partnership was launched.
• June 2023: The EU published its first comprehensive Economic Security Strategy.
• July 2025: The two partners unveiled the Japan-EU Competitiveness Alliance at a bilateral summit.
• January 2026: Akazawa and Sejourne discussed critical minerals cooperation and financial support at Davos.
• February 2026: The United States announced strategic mineral partnerships with the EU and Japan, alongside an action plan with Mexico.
• March 2026: The European Industrial Accelerator Act was proposed.
• Early May 2026: The seventh High-Level Economic Dialogue in Brussels reviewed progress and future cooperation.

The successive initiatives reflect a widening agenda. Tariff reductions remain part of the relationship, but officials now also have to consider export restrictions, concentrated industrial capacity and the possibility that access to essential materials could become a source of political pressure.

Trade Agreements Meet Security Concerns

The 2018 agreements were designed mainly to remove trade barriers and bring regulatory standards closer together. Since the Economic Partnership Agreement took effect in 2019, trade in goods has increased by roughly 11%, while trade in services has risen by 42%.

Those commercial gains did not equip the agreements with mechanisms for handling export bans, screening investments or coordinating a response to a supply crisis. The new security agenda therefore requires cooperation beyond the arrangements that helped expand ordinary trade.

Japan experienced the danger of concentrated supplies in 2010, when a maritime dispute with Beijing triggered a sudden Chinese embargo on rare earth exports. At the time, more than 90% of Japan's rare earth supply came from China. Diversification has since reduced that share to around 60%, a fall of more than 30 percentage points, although China still supplies a majority.

Tokyo's Economic Security Promotion Act, passed in 2022, created a legal framework to protect critical technologies and stockpile essential materials. Stockpiling means holding supplies in reserve so that a disruption does not immediately leave manufacturers without the inputs they need.

Europe's first comprehensive Economic Security Strategy followed in June 2023, shaped by Russia's invasion of Ukraine and the supply disruptions exposed during the pandemic. Its central goals included derisking, meaning reducing excessive dependence on a single country.

Implementation across the EU has been complicated by differing national and corporate interests. German automotive and chemical companies continue to deepen research and production ties with China, while member states including Hungary actively seek Chinese direct investment. Brussels must translate a shared concern about dependence into decisions across economies with different commercial priorities.

Digital Cooperation Extends Beyond Minerals

The EU-Japan Digital Partnership, launched in 2022, adds artificial intelligence, quantum computing and semiconductor supply chain security to the relationship. These areas connect advanced technology policy with the same concerns about access and disruption driving the minerals discussions.

One flagship project is an Arctic submarine cable linking Europe and Japan. It is intended to bypass politically sensitive routes and make digital connections more resilient to disruption. The project extends the security agenda from physical materials to the infrastructure that carries information between the two economies.

The network of agreements still lacks a dedicated institutional framework for coordinating responses to economic coercion or pooling purchases of strategic minerals. Joint procurement would allow buyers to combine demand rather than purchase separately. The Brussels dialogue represented another step toward addressing those gaps, alongside the existing trade, digital and industrial partnerships.

Why Processing Matters as Much as Mining

China dominates refining and processing across rare earths, graphite, gallium, germanium and lithium compounds. These materials are essential to semiconductors, electric vehicle batteries, wind turbines, robotics, aerospace components and advanced defense systems.

Mining is only the beginning of the supply chain. Extracted material must be separated, purified or converted into forms that manufacturers can use. A new mine outside China can therefore leave buyers dependent on Chinese facilities if the material still has to pass through them before reaching a factory.

The European Critical Raw Materials Act, adopted in 2023 and enacted in 2024, provides the legal backbone for Europe's effort to reduce concentrated supplies. At the Brussels dialogue, officials highlighted progress on strategic projects linked to the act and pledged support for additional joint mineral ventures.

Japan contributes experience in advanced materials processing, battery chemistry and precision manufacturing. The EU brings financing capacity, regulatory coordination across 27 national markets and considerable purchasing power. Their aim is to build alternative industrial networks capable of competing with China's vertically integrated production, in which connected businesses cover successive stages from raw materials to manufactured goods.

Cooperation is intended to stretch from extraction through manufacturing to recycling products at the end of their useful lives. Rare earth separation, cathode production and other processing stages are central to that effort. Cathodes are battery components that help determine how a battery stores and delivers energy.

Brussels and Tokyo also worry about Chinese industrial overcapacity. Subsidized production has pushed large quantities of steel, solar panels, batteries and electric vehicles into global markets, driving prices down to levels many competitors struggle to match. Lower prices have helped parts of the green transition, but officials fear domestic industrial capacity could shrink before alternative supply networks become commercially viable.

The challenge is therefore both physical and financial. New facilities must be able to produce the required materials, while their operators need enough revenue to keep running in markets where Chinese competitors can offer much lower prices.

Businesses Press for Protection Against Coercion

Nearly 100 corporate executives at an EU-Japan Business Round Table in Brussels called for closer cooperation during a period of geopolitical and economic change. They urged governments to strengthen rare earth and semiconductor supply chains and prevent raw materials and technology from being used as instruments of pressure.

The business leaders, representing major companies from both jurisdictions, described the trading environment as acutely dangerous. In their joint declaration, they called for action against export barriers and asked governments to identify critical technologies that could provide counterpressure against coercive trade practices.

The executives set out their central appeal in the joint declaration:

We call for deeper collaboration between Japan and the EU in an era of unprecedented geopolitical and economic transformation,

The group also described Japan and the EU as natural advocates for robust multilateralism, meaning cooperation through shared international rules and institutions. They argued that both could use their technological leadership to resist the weaponization of goods and services.

Businesses nevertheless remain deeply connected to China. It is a major supplier of critical minerals and consumer goods, as well as an indispensable market for European and Japanese industries. Companies must balance government demands to reduce concentrated dependence against their need for competitively priced inputs and access to customers.

Those tensions have become more pressing since diplomatic friction escalated over remarks by Japanese Prime Minister Sanae Takaichi concerning Taiwan. Chinese export controls targeting Japan have intensified, placing companies between political pressure and their existing commercial arrangements.

The corporate declaration called for alignment across trade, economic security and industrial competitiveness. Its authors argued that the partners could address protectionism and regulatory complexity while preserving shared values. That business support adds political momentum to efforts to establish mineral stockpiles and joint processing facilities.

Washington Joins the Minerals Effort

The United States added another layer of cooperation in February by announcing strategic partnerships on critical minerals with both the EU and Japan, together with an action plan involving Mexico. The emerging trilateral framework envisages price floors for strategic commodities, coordinated stockpiles and aligned standards for mining, processing and trade.

A price floor is a minimum supported price. Its purpose in this context is to give producers greater confidence that a sharp fall in market prices will not make their operations financially unworkable. Coordinated reserves would address a different problem by providing supplies during interruptions.

Washington and Brussels committed to draft a memorandum of understanding on supply chain security within 30 days. Tokyo and Washington continued coordinating mineral investments. The United States Trade Representative presented the initiative as a signal that the largest open market economies were committed to a new approach to preferential trade in critical minerals.

The Trump administration has also moved to build a domestic stockpile and acquire equity stakes in companies including MP Materials, USA Rare Earth and North American lithium suppliers. Equity stakes give the government an ownership interest in the companies receiving investment.

A Defense Department agreement with MP Materials already includes an offtake guarantee and a price floor designed to shield domestic producers from Chinese market manipulation. An offtake guarantee provides an assurance that production will be purchased, helping a supplier plan investment and operations.

American involvement brings capital, technological reach and geopolitical weight to European and Japanese efforts. It also introduces uncertainty through unpredictable tariff policies and Washington's push for rapid decoupling, or separating supply chains from China. European and Japanese industrial capacity may not be ready to move at that pace.

Replacement Costs Reach Beyond Mineral Supplies

China's processing strength reflects decades of state subsidies, targeted industrial policy and expansion of production capacity. Europe has little domestic refining capability, while Japan continues to obtain most of these inputs from Chinese suppliers despite its advanced manufacturing expertise.

Replacing those connections is an industrial reconstruction effort measured in decades and hundreds of billions of dollars. It requires more than identifying another supplier: processing equipment, manufacturing capacity and reliable commercial demand must also be developed.

European discussions about excluding Chinese suppliers from critical infrastructure show how expensive a broader separation could become. Solar inverters and telecommunications equipment are among the technologies affected. Solar inverters convert the electricity generated by panels into a form usable by electricity systems.

One recent assessment put the cost of removing and replacing Chinese hardware across strategic sectors at hundreds of billions over the next five years. Further losses could come from slower digitalization, service interruptions and employment adjustments. Small and medium enterprises and ordinary consumers would likely face the sharpest price increases.

These costs help explain why a common security objective can produce different policy preferences. Governments may support diversification while companies remain concerned about replacement spending, production continuity and the competitiveness of their products.

Clean Energy Makes the Trade-Off Harder

European and Japanese manufacturers still depend on competitively priced Chinese solar panels, battery components and refining equipment to pursue their climate targets. Restricting those imports risks raising domestic costs and slowing the green transition while both economies work toward ambitious net zero commitments.

Alternative supply chains face their own difficulties. Environmental objections can delay projects, some technologies are not yet commercially mature, and higher labor costs can make production uncompetitive without sustained government subsidies.

Akazawa acknowledged the tension in January, sharing concerns about non-market policies with European counterparts while Japanese industry remained heavily embedded in the same international supply networks. Both partners need to reduce excessive concentration without losing the inputs that keep factories operating and climate plans within reach.

The Brussels talks also exposed a risk within the partnership itself. If European industrial preferences exclude Japanese products, policies meant to strengthen resilience could make joint investment less attractive. Cooperation with Washington brings a similar need to align incentives so that national support measures contribute to shared supply capacity.

The immediate objective is to build workable alternatives while preserving production. Coordination between the EU and Japan can improve resilience, but China's established industrial position is unlikely to be fundamentally eroded in the near future.

Time is a central constraint. Both partners want alternative industrial networks operating before export controls and Chinese overcapacity further weaken their competitive position. The early May dialogue advanced that effort, while leaving the larger task of financing, building and sustaining new capacity expensive and distant.

Key Points

• The EU and Japan held their seventh High-Level Economic Dialogue in Brussels in early May 2026, reviewing cooperation under the alliance launched in July 2025.
• Critical minerals, batteries, semiconductors, defense industries, hydrogen and offshore wind are priorities for joint work.
• Japan has reduced its dependence on China for rare earth supplies from more than 90% in 2010 to around 60%.
• Tokyo raised concerns that the European Industrial Accelerator Act could favor EU production at the expense of cooperation with Japanese companies.
• Nearly 100 business executives called for stronger supply chains and action against the use of materials and technology as instruments of pressure.
• United States partnerships envisage price floors, coordinated stockpiles and common standards for critical minerals.
• High replacement costs, limited refining capacity and continued reliance on Chinese clean technology inputs complicate diversification.