Key Takeaways:
- The author says the EU’s heavy reliance on Chinese manufactured goods, electronics, and critical materials such as rare-earth magnets and magnesium is a strategic vulnerability, even though cheap Chinese inputs have also helped European industry stay competitive.
- Britain after Brexit is presented as a possible template: tighter screening of Chinese investment, telecom and minerals policy shifts, and new trade deals (including with India) aimed at diversifying away from Beijing rather than cutting ties overnight.
- India is framed as a partner for gradual, sector-by-sector diversification—electronics, pharma ingredients, textiles—starting with a few EU states and Indian states, not a full, immediate replacement for China.
“Europe has to grow out of the mindset that Europe’s problems are the world’s problems, but the world’s problems are not Europe’s problems,” India’s External Affairs Minister S. Jaishankar remarked in 2022, at the GLOBSEC Bratislava Forum.
Four years later, Europe faces a problem that has become increasingly relevant to India. China accounts for over 22% of total EU imports in the second quarter of 2026, making it the primary and largest supplier of goods to the bloc, followed by the United States and the United Kingdom. As the European Union seeks to reduce its dependence on China, India, because of its potential could turn this biggest vulnerability into a golden opportunity.
However, the central question remains whether Britain’s approach can work for the rest of Europe. This leads us to consider whether India can truly emerge as a credible strategic alternative to China or simply contribute to Europe’s broader effort to diversify its dependencies.
Europe’s dependence on China is reasonably evident in the structure of its trade. In 2025, the European Union recorded a goods trade deficit of approximately €359.8 billion with China. The most dominant part of this dependence is the manufactured products. In 2025, manufactured goods constituted 97.3% of EU imports from China, with machinery and vehicles alone accounting for 54.4%.
The EU obtains around 98% of its rare-earth magnet demand, 97% of the EU’s magnesium supply, and all its heavy rare-earth requirements from China. In solar photovoltaics, Chinese companies have historically controlled the global capacity across every stage of the supply chain. It leaves Europe dependent not simply on Chinese products but on Chinese manufacturing ecosystems. Even in the everyday industrial and technological goods, the dependence continues. In 2024, the EU imported €96.8 billion of electrical machinery and parts, €60.9 billion of telecommunications and audio equipment, and €45.9 billion of computers and data-processing equipment from China.
Even where Europe has tried to reduce this exposure through trade measures, the costs and limitations of doing so are evident. The EU imposed additional countervailing duties on Chinese battery-electric vehicles ranging from 7.8% to 35.3%, on top of the existing 10% import duty. This indicated that tariffs could restrict Chinese access to the European market but cannot instantly recreate the manufacturing capacity and supply chains that Europe currently lacks. The issue, therefore, is not simply that Europe buys a large quantity of Chinese goods. It is that China holds difficult-to-replace positions across multiple critical supply chains, making diversification far more complicated.
The European Union’s heavy reliance on China for goods and raw materials creates several long-lasting issues that go beyond the displayed trade imbalance. Policymakers consistently worry that so much dependency undermines European strategic autonomy. Europe cannot pursue an independent foreign policy on Taiwan, human rights, or trade disputes while remaining so prominently reliant on Chinese goodwill for essential inputs. Due to this existing effect, EU member states usually soften criticism of Beijing to protect and continue economic ties.
Secondly, China, being the single supplier controlling a critical supply chain of refining, processing, and component manufacturing, can easily weaponize access during a political dispute. This has the potential to turn current economic efficiency into a concerning security vulnerability. Especially troubling in strategic sectors like green technology, electronics, and defence-related materials, where alternative suppliers have not been readily explored.
As a whole picture, these concerns have led the EU to start acting in order to reduce its dependence on China. These measures are aimed at safeguarding its strategic autonomy and limiting future economic and security risks.
But one also cannot overlook an uncomfortable reality. The Chinese dependency has given a competitiveness edge to EU. It has made European finished products more competitive globally. Cheap Chinese intermediate goods and components have privileged European industries to quietly build their own business models around this dependency. Consequently, making it politically and economically painful to unwind even when leaders recognize the risk.
Before looking at India’s potential to act as an alternate for China in the EU, it is essential to look where it has already acted as one. Even amid these challenges, the United Kingdom offers a useful precedent.
Since Brexit, Britain’s economic relationship with China has been quietly but steadily unravelling. The pattern points to deliberate policy choices in London rather than any broader slowdown in China’s trade. At the end of 2024, Chinese investment stock in the UK was £2.5 billion, representing only 0.1% of total UK inward foreign direct investment. That imbalance is the real tell, because over the same stretch China’s trade with the EU barely moved and its exports to the US ticked up.
So, whatever is happening with the UK looks distinctly self-inflicted rather than a byproduct of China pulling back globally. Overall two-way trade between the two countries has fallen by double digits year-on-year, landing just above £100 billion.
There was a sequence of deliberate policy choices that made this not another accidental shift. In telecoms, Huawei was initially allowed to retain a limited role in Britain’s 5G network, at just over a third of the non-core network. But the government ordered its complete removal within a few years. They cited national security advice and pressure from Washington as the main reasons. The government then used this moment to help build a new alliance of trusted partners across the G7 plus a handful of allied economies.
A similar urgency is now visible around critical minerals, giving proof of how the UK has now transitioned into an active response phase. Before Brexit, the UK had no clear strategy in this area, but they published one only a few years later. It is mostly due to China’s dominance over materials like tungsten, where it controls most of the global supply. Due to China’s restriction on exports, prices rose roughly tenfold within months. Since London was in an active response phase, the answer was a sizeable government-backed investment. It was to reopen a long-dormant tungsten mine in the southwest, its first domestic source of the metal in years. It was explicitly framed as an effort to cut reliance on a single, high-risk supplier.
Behind these measures is a new investment-screening law that came into force a few years ago. It gave Britain, for the first, the standalone power to scrutinize and block foreign deals. Evidently, it has been used heavily against Chinese investment specifically. That fits a broader pattern. Chinese-owned investment stock in Britain remains a tiny fraction of all inward investment, among the lowest shares of any major economy.
Beyond just pulling back from China directly, Britain has spent the post-Brexit years quietly lining up alternatives. India has turned into a real centrepiece of that effort. Joining the CPTPP in 2023-2024 gave the UK deeper trade ties with Japan, Australia, Vietnam, and Malaysia, all of which double as counterweights to Chinese supply chains. The earlier FTAs with Australia and New Zealand were built on that same “diversify away from China” thinking. Critical mineral partnerships with Australia and Canada added another piece. This is aimed at materials like tungsten and lithium, where China’s grip has traditionally been near total.
The India-UK CETA, signed in 2025, slots neatly into this picture too. It scraps tariffs on almost all Indian exports to Britain, and analysts have been blunt about it. India is using this relationship to sidestep its own China dependency while dodging US tariffs at the same time, meaning both sides end up pulling away from Beijing together.
It acted largely alone and without the scale or leverage of a 27-member bloc. Yet this mid-sized economy managed to build alternative markets. It also reduced its tariff exposure and risk on a handful of accounts.
The UK’s China playbook offers a template the rest of Europe would do well to follow. India looks like the natural partner to build it around. Europe’s exposure to China remains far deeper than Britain’s in electronics, solar components, pharmaceuticals, and rare earths. The EU still leans on Chinese supply chains in ways that leave it strategically vulnerable. Especially as Beijing has shown willingness to weaponize export controls, as seen with tungsten.
India has the scale, workforce, and growing industrial base to absorb a meaningful share of that dependency. However, the smarter move isn’t attempting a wholesale switch overnight. A more effective approach would be to begin with a small number of carefully selected sectors.
Europe could begin with sectors where China’s grip is strongest and where alternatives are readily available. India’s electronics assembly and components industry has grown rapidly, particularly around hubs such as Tamil Nadu and Karnataka. It could also expand its role in active pharmaceutical ingredients, building on its position as a major supplier of generic medicines. Textiles offer another opportunity, as Gujarat and Tamil Nadu already have the manufacturing infrastructure needed to handle greater demand. Rather than trying to negotiate one EU-wide framework, individual member states could first build deeper ties with two or three Indian states. Using those as proof-of-concept before scaling continent-wide. Much like the UK’s CETA and CPTPP approach, which built momentum gradually rather than all at once.
None of this holds the power to erase China’s importance overnight. India still faces significant infrastructure and regulatory challenges of its own. But the direction is clear enough. Just as Britain used trade deals and mineral partnerships to steadily de-risk from China without making a sudden break. Europe has every reason to follow that same gradual approach. India, sector by sector and state by state, is positioned to become the alternative China once was.
