The European Commission is weighing legislation that would require companies in sensitive sectors to reduce reliance on single suppliers, particularly in China, and diversify to at least three sources, reported Reuters.

Trade Commissioner Maros Sefcovic said the proposal would form part of a wider review of EU trade defences due in the third quarter. Measures under consideration include speeding up anti-dumping and anti-subsidy cases and tackling industrial overcapacity.

Speaking at a European Policy Centre event in Brussels, Sefcovic said diversification now requires a dedicated instrument. He stressed that critical minerals and other high-risk sectors must be weaned off dependence on one supplier.

By securing at least three sources of critical supplies, companies would be better protected against supply chain disruptions and government policies such as China's export restrictions on rare earths, he said.

EU leaders are expected to discuss economic security at a summit in Brussels on June 18-19 and provide guidance on which tools the Commission should prioritise.

Five EU countries last month urged Brussels to strengthen trade measures against cheap imports. Current EU policy already encourages diversification when one source accounts for 40 per cent of certain supplies.

Mr Sefcovic said any new rules would need coordination with industry and a transition period. He acknowledged the economic situation was challenging but said companies must integrate a risk premium into operations as supply chain realities have changed.