Europe In The Rare Earth Trap: Up To 4 Million German Jobs At Risk As Beijing Tightens

Submitted by Thomas Kolbe

Rare earth elements have become geopolitical dynamite. According to a new analysis by consultancy McKinsey & Company, up to four million jobs in Germany are on the line if top supplier China imposes a permanent export ban.

These critical minerals are indispensable to Germany’s high-tech economy: they’re used in precision sensors, specialized magnets, and control systems essential to engineering, defense, communications, and aerospace. Without them, a significant share of the country’s industrial value creation would grind to a halt.

McKinsey’s analysis, cited by Handelsblatt, puts the risk in stark numbers: one million jobs in core technology sectors could be directly threatened if supply lines collapse. These industries generate about €150 billion in annual value added — the beating heart of German innovation and manufacturing.

The Downstream Domino Effect

The fallout wouldn’t end there. A vast network of suppliers and consumer-oriented industries tied to those wages depends on stable supply chains and geopolitical calm. McKinsey estimates another three million jobs in downstream sectors and retail would be at risk if a trade war with China triggered a lasting supply cutoff.

In a worst-case scenario, Germany faces a total of four million endangered jobs and an annual value-added loss of €370 billion — roughly 9% of its GDP. While this is a modeling scenario, it illustrates the brutal leverage of global resource politics.

Germany’s industrial fragility is already visible. Since 2018, output in key sectors like mechanical engineering has collapsed by over 30%, with total industrial production down about a quarter. Roughly 250,000 well-paid industrial jobs have disappeared — and the slide shows no sign of stopping. A sudden cutoff of rare earth imports would collapse entire production lines within weeks.

Choke Point: China

Germany is dangerously dependent on China, which controls around 70% of global rare earth production and about 90% of processing capacity. In 2024, 65% of Germany’s rare earth imports — 5,200 tons worth over €64 million — came directly from China. If Beijing turns off the tap, Europe’s high-tech supply chain will stall like an engine without fuel.

Given its market dominance, Beijing wields enormous pricing and coercive power. That’s why finding alternative sources has become a top priority in both Brussels and Washington.

One unlikely player in this global chess game: Greenland. The island’s Kringlerne and Kvanefjeld deposits hold some of the largest known rare earth reserves in the world — enough to supply global demand for decades.

Greenland: The West’s Escape Hatch?

Greenland’s strategic value is obvious: it could break China’s stranglehold on critical minerals essential to both high-tech and energy transition industries. But between ambition and reality lies a canyon. Development has so far been blocked by high infrastructure costs, strict environmental regulations, complex permitting, and local opposition — a textbook case of Western self-handicapping.

Europe’s fatal dependency on Beijing’s goodwill has created a dangerous global imbalance. Brussels is largely defenseless against China’s state-backed export machine, which is flooding Europe with cheap goods while Beijing holds the decisive rare earth trump card.

From a European perspective, the question is obvious: Would closer strategic alignment with Washington have been smarter than constant confrontation?

Strategic Rift with Washington

Such a pivot would require a radical shift in Brussels. The U.S. under Donald Trump has returned to minimal government and free-market principles. For Europe to partner effectively, it would have to shed its climate obsession and embrace real market economics.

The transatlantic gap is stark. Europe imports around 60% of its energy, is resource-poor, and has isolated itself geopolitically by breaking with Russia. The U.S., in contrast, is energy independent and can leverage economic and military power to secure access — whether through Greenland, domestic mining, or temporary Chinese imports.

Trump’s tariff strategy has shown how powerful this leverage can be: tariffs on Chinese goods have not triggered U.S. inflation because producers and traders in China absorbed the costs through their margins. Washington has a massive geopolitical hammer — and it will use it to secure rare earths.

EU Digging Its Own Hole

While the U.S. uses hard power to push Beijing to the table, Europe is losing access to its former resource-rich spheres of influence. What France experienced in Niger — losing uranium access — is now repeating on a continental scale.

Brussels’ response: recycling initiatives and trade deals with South American countries to cover part of its rare earth demand. These may ease pressure but won’t solve the structural problem: dependency remains.

If Europe wants to protect its industrial base, it must negotiate — at potentially high cost — to buy time for a fundamental policy reset. That means returning to free-market principles, ditching its climate cult, and rebuilding transatlantic trust.

But political reality tells a different story. Neither Brussels nor Berlin shows any sign of abandoning the eco-socialist path. In the end, it will be Europe’s workers who pay the price.

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About the author: Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.