The text below presents key highlights from the Mainsource Strategic Intelligence Brief as published by Economic.bg
The global trade architecture is undergoing a structural shift, with the model of unrestricted globalization giving way to increased regionalization. This, according to an analysis by the specialized trade and investment company Mainsource, shows that the EU has the necessary capacity to overcome external raw material and production dependencies.
Europe keeps positions in key industries
Analysis of scale, capital structure and market positioning shows that in the heavy industrial sector – including mechanical engineering, industrial robotics and medical devices – European industry maintains a strong position. The EU and its strategic partners maintain a high share in critical technological stages of the global manufacturing system, including electronic design software (EDA), specialized applied chemistry and photolithography. A specific example is the Dutch ASML, whose state-of-the-art photolithography systems are a critical technological resource for the production of high-end semiconductors.
In addition, highly specialized European medium-sized manufacturing companies, whose chains are mainly incorporated within the EU, show higher resilience to external price pressures and a willingness to take orders from counterparties that are diversifying their activities outside the Asian market due to geopolitical risks.
Regionalization as a new production model
The US has undertaken a market strategy, limiting its exposure to the Asian market through the concept of “nearshoring” (a business strategy for relocating production activities, services or business processes to countries that are close in geography, culture and time) and the emergence of Mexico as a leading trading partner. Similarly, the European Union has a similar potential for diversification in Central and Eastern Europe and North Africa.
The logic of this regionalization has been developed through a selective model of reshoring and nearshoring. Instead of pursuing full production autonomy in all sectors, the relocation of capacities to European soil or to neighboring regions focuses on high-tech components and strategic intermediate goods. The aim is to increase the predictability of supplies and limit the systemic risks of logistical blockades.
China’s dependence now carries more than just price risk
For manufacturing companies in the Community, the macroeconomic reality in 2026 requires a review of operating models; the supply strategy, based mainly on imports from China, changes its profile from a tool for price optimization to a source of logistical and liquidity risks. In this context, Brussels’ protective barriers and the new Free Trade Agreements do not portend economic decline; they cease to be a simple regulatory instrument to limit imports, but free up structural opportunities within the single market, previously occupied by subsidized Chinese production.
The scale of the dependence is visible in the data: in the second quarter of 2026, imports of goods from the PRC into the EU amounted to €153.6 billion, or 21.9% of total imports, with European exports to the Chinese market of €50.3 billion. The trade deficit in question is €103.3 billion for the quarter. In parallel, some micro and small businesses have shifted to direct imports of finished consumer goods without local industrial processing, which increases pressure on the local industrial base.
The risk is not limited to price alone. The rationale states that the PRC holds nearly 85-90% of the global capacity for chemical refining of key rare earth materials, and restrictions and licensing regimes on strategic metalloids such as gallium, germanium and antimony indicate vulnerability to sudden regulatory changes. When raw materials from alternative countries still have to pass through Chinese jurisdiction for industrial refining, transaction costs, insurance and freight increase.
From protective barriers to new trade partnerships
The EU’s response is twofold. On the one hand, it is introducing protective regulatory mechanisms against price dumping and fiscal erosion; on the other, it is expanding the network of trade and strategic agreements with third countries, including Mercosur, Australia and Canada, to access alternative markets and diversify supplies of critical raw materials.
“This provides local companies with the opportunity to regain lost positions and high-margin segments on their own soil.”
This opportunity is most visible in companies that do not compete primarily on low price, but on quality, durability and patented design. It is these European manufacturers that are more resistant to external price pressures and can absorb demand redirected from the Asian market. The selective use of protective barriers is presented not as a mechanism for the mechanical recovery of low-margin mass production, but as a tool for stimulating local production with high added value.
Strategic independence without complete isolation
The analysis also states that the implementation of new regional channels, supported by software patents, a developed state, supranational, private and corporate capital base and intra-EU diversification of supplies, provides European industry with the conditions to achieve strategic independence and long-term sustainability.
For small and medium-sized enterprises, this strategic independence does not necessarily mean complete isolation from global chains. The rationale formulates a “Hybrid Premium Model”, in which basic physical hardware is supplied from diversified markets, and the high margin is created through patented European software, system integration, precise engineering design and long-term service. Thus, the competitive price of basic components is combined with European added value and higher sustainability.
At the same time, intra-European sustainability is supported by companies with supply chains incorporated mainly within the EU, as well as by the policy of expanding external partnerships for critical raw materials. This creates a combined model: regionalization of strategic units, diversification of inevitable foreign imports, and preservation of European control over technologies and high value-added activities.
Different strategies for large companies and SMEs
Optimizing production processes and reducing market risks require a differentiated approach by EU business management. At a strategic level, large industrial entities should direct capital investments and long-term purchase contracts to processing facilities outside the PRC, while simultaneously using the new Free Trade Agreements to aggressively export finished products to alternative markets.
The distinction between large industrial groups and SMEs is essential. Large European conglomerates with significant capital resources are already implementing the “China + 1” strategy, duplicating their supply chains in alternative destinations such as India, Vietnam or Mexico to supply Western markets, while maintaining capacities in the PRC to serve the Asian region. This is a practical form of diversification that reduces dependence without requiring an immediate complete withdrawal from China.
The need for investment in processing capacity outside the PRC is also supported by the concentration of refining capacity: the rationale states that the presence of deposits outside China is not enough if there is no industrial capacity for chemical processing. In parallel, new trade agreements are presented as a channel not only for supply, but also for expanding the access of European finished products to alternative markets.
High added value as a competitive advantage
In the SME sector, the management solution requires structuring the business model towards intelligent integration: transforming the basic global hardware capacity into an accessible base on which high added value is added through patented European software, precise engineering design and local service. In both directions, management should replace the factory price assessment with a detailed analysis of the total cost of ownership, quantifying logistical risks, insurance premiums and fiscal regulatory burdens.
With high energy and labor costs in the eurozone, mechanical duplication of low-margin mass production is determined to be economically inefficient. Therefore, the sustainable model uses the basic global hardware as a platform on which European companies add high margins through specialized software, precise engineering design, system integration and local warranty service.
At the same time, the factory price alone does not reflect the full risk. The rationale explicitly mentions additional costs along the chain – transaction costs, insurance and freight for complex refining routes, higher price premiums for urgent diversification, as well as pressure from customs and regulatory barriers. These factors provide an economic basis for assessing the total cost of ownership rather than comparing only the factory price.
From strategy to measurable diversification goals
At the operational level, boards should set two quantitative indicators with an 18-month implementation horizon: the Raw Material Diversification Ratio, fixing the share of Chinese components in the overall production structure below 30% in line with the European Critical Raw Materials Act (CRMA), and the Architectural Flexibility Ratio, ensuring at least 45% alternative sourcing of input parts through redesign of products according to the “Design for Availability” concept.
The principle of quantifiable diversification is supported by the European Critical Raw Materials Act, which sets targets by 2030: at least 10% domestic extraction, at least 40% internal processing, at least 25% recycling and a maximum of 65% dependence on a single external supplier for each strategic raw material. The analysis also highlights that achieving these targets requires significant capital expenditure and a multi-year transition to reorganise medium-sized businesses and heavy industry.
The author of the report is Alexander Milenov, founder and CEO of Mainsource – a trading and investment company that connects production capacities with demand in international markets.
