Cracks in the Chain Mapping European Import Dependencies in Global Industrial Networks

CSC Working paper n.1 2025 

Corresponding authors: Matteo Pignatti, Chiara Puccioni

The tension between the benefits of trade openness and the need for national autonomy has been a constant factor in economic relations among nations. Global supply chains intensify this tension by both enhancing the benefits of trade specialization and amplifying the ripple effects of disruptions across production networks, even when certain nodes are not directly linked to foreign markets. In an era of overlapping crises and growing political fragmentation, it is crucial to reinforce supply chains—particularly in strategic sectors that underpin the green and digital transition.Thus, it is necessary to identify the products most exposed to supply chain disruption. In this article, we reconsider and expand the approach proposed by the European Commission to identify critical dependencies at the product level for the European Union as a whole, in comparison with other major world economies. From an empirical point of view, we add a set of criteria to identify vulnerable supply chains for the individual E.U. member states, which allows us to investigate other layers of vulnerabilities, comparing those common between European economies and the EU as whole and those specific to each member state. From a methodological point of view, we add additional selection criteria: the risk profile of supplier countries, and the potential for import diversification.

By leveraging a dataset that gathers information on bilateral trade flows for over 5,000 products (at the 6-digit level) traded among more than 200 countries, we apply the defined criteria to the aggregate of the European Union, comparing it with the two major trading partners, China and the USA, as well as with E.U. member states. Overall, the analysis suggests that import concentration is the most binding of all constraints identified, selecting about 50% of the set of critical products. Differences emerge in countries’ ability to diversify the country of origin of their imports, both at the global level and between E.U. member states, and concerning the capacity substitute imports with exports, particularly between China and the U.S., with the latter characterized by a higher trade deficit. Moreover, the main European industrial economies display different potential substitutability of extra-EU imports with intra-EU trade.
However, over the past ten years, none of the countries analyzed have consistently diversified the origin of their imports. Trade vulnerabilities emerged for all the economies considered (for some more than others), regardless of their size. Indeed, critical dependencies seem to be mainly the result of long-term choices involving specialization, reallocation of international production chains, and efficiency-seeking in selected trade partners. For Europe and the U.S., this process is closely tied to the growth of emerging countries, with China at the forefront.

Focusing on a set of intermediate and capital products selected as critical for European industry in most of the last six years, it is also possible to further characterize dependencies in terms of industrial inputs. We evaluate their strategic relevance, and the geopolitical and climate risks attached, related to the countries from which these products are imported. Finally, through an iterative algorithm that redistributes market share among all existing exporters worldwide, besides those already exploited, we investigate whether alternative suppliers of these products are available to diversify imports and decrease trade dependencies.