EU faces AI gaps with 90% rare-earth reliance on China

European Union efforts to build an AI alternative to US and Chinese blocs are constrained by a €1 billion-a-day trade deficit with China, Euronews reported in an Oct. 29 news article.

The daily trade gap is material because the same report put Europe’s dependence on China for rare earth elements at up to 90%, underscoring the scale of the bloc’s supply exposure.

The article described the US and China as the two leading AI powers, with rival groupings forming around technology access, standards and commercial influence. Europe is trying to reduce reliance on both while avoiding exclusion from either camp.

Euronews described the US-led bloc as Pax Silica and the China-backed alternative as the World AI Cooperation Organization. The choice facing other countries, the report said, is between US advanced chips and AI systems and China’s cheaper open-source technology.

Brussels has tried to answer that pressure with a mix of industrial support, cloud infrastructure and regulation. Its AI Act, adopted in 2024, is billed by Brussels as the “world’s first comprehensive rules on artificial intelligence”.

The law uses a four-tier risk framework, meaning obligations rise with the assessed risk of an AI system. Limited-risk applications such as spam filters face lighter requirements, the report said.

On hardware, the article pointed to the EU Chips Act and recent state aid, meaning government support approved under EU rules. It cited a €319 million package for Austria’s Infineon Technologies, compared with larger similar projects of €5 billion in Italy and €1.6 billion in Czechia.

Europe also has entrenched suppliers in parts of the semiconductor chain. Euronews named ASML, which makes advanced lithography systems used to produce chips, and Soitec, which supplies semiconductor substrates, as existing strengths.

The bloc’s harder task is building capacity at scale. The report said the EU has no dominant frontier AI model, referring to the most capable general-purpose systems, comparable with those developed by OpenAI, Anthropic or China’s DeepSeek. France’s Mistral was cited as one of the few prominent European contenders.

Brussels is also supporting a federated cloud and AI network. Instead of replacing national systems with one European platform, the project would link existing infrastructure across borders, the article reported.

The report linked the urgency in European capitals to two recent cases of foreign-controlled technology access. It cited President Trump’s forced shutdown of Anthropic’s Fable 5 and Mythos 5 models in June, and the more recent switching off of Elon Musk’s Starshield satellite network in Ukraine.

China remains a central exposure even as Brussels seeks to reduce that dependence. Euronews reported that Beijing agreed to create a “green channel” to speed licence approvals for rare earths and permanent magnets bound for the EU, as part of an initial trade deal with the bloc.