Watching China in Europe—July 2025
An Emboldened China
When EU leaders agreed back in April to hold a late-July summit with China, it looked like Brussels would be speaking to Beijing from a position of unusual strength. The United States and China were in an escalating trade war that would push American tariffs up to dizzying heights of 145%. Europe had been granted a 90-day reprieve from Donald Trump’s “Liberation Day” duties, leaving the bloc in a far more comfortable position than Beijing. By the time EU leaders would sit down with their Chinese counterparts, the thinking went in the spring, Beijing would be humbled by the Trump trade war and Europe would have finalized a deal with the US administration to reduce transatlantic tariffs. The expectation in Brussels was that joint action against China would be part of that deal.
Three months later, the picture looks very different. The United States and China, after meetings in Geneva and London, have agreed to a shaky trade truce that has pushed down bilateral tariffs and left Beijing feeling emboldened. It was Trump, after all, who flinched (not once but twice) when the trade war got hot. By imposing curbs on rare earth exports, China demonstrated an ability and willingness to inflict economic pain on Washington and its allies. No one knows how long the latest US-China détente will last, but Trump, according to Nikkei Asia, is now planning a trip to China with dozens of American CEOs in tow. If the trip happens, it would be another symbolic victory for Beijing.
Flailing About
Europe, meanwhile, has yet to reach a trade agreement with the United States. In recent weeks, Brussels has come around to the view that any deal with Washington will be limited in scope, leaving US tariffs of 10%-20% in place. European leaders just endured humiliating G7 and NATO summits, where they were forced to pander to a preening Trump. Neither summit produced a statement condemning China by name for its support of Russia or its predatory economic policies. Unlike Joe Biden, whose administration spent years pressing allies to call out China, Trump doesn’t seem to care.
This is the challenging situation in which Europe finds itself with the EU-China summit looming on July 24-25. The transatlantic front against China, which was a work in progress under Biden, has crumbled under Trump, leaving Europe rudderless and flailing for a strategy. In one camp, there is Trade Commissioner Maroš Šefčovič, who appears open to a package deal under which Brussels would remove its tariffs on Chinese electric vehicles (EVs) in exchange for the withdrawal of Beijing’s retaliatory measures (targeting European cognac, pork, and dairy), guarantees on the flow of rare earths, and Chinese pledges to make value-added investments in Europe.
Coercion and Blackmail
In the other camp are veteran EU trade negotiators and diplomats. They believe that the bloc would be caving in to Chinese coercion by accepting such a deal and are opposed to any agreement that rewards Beijing for its weaponizing of rare earths through European concessions in other areas. “We are not going to give the shop away. We are not going to throw our signature defensive trade measure out the window,” said a senior EU official, referring to the EV tariffs. This camp believes the summit is unlikely to produce more than a modest joint statement on combating climate change. “We have entered a period in which we will be rebalancing the relationship with China through unilateral measures,” the senior EU official said. “Our response will be asymmetric. They won’t like it.”
Where on this is European Commission President Ursula von der Leyen, whose stance will ultimately determine where the EU lands? Back in January, as Trump was moving into the White House, she opened the door to closer cooperation with Beijing. But since then, she and her team have (with little success so far) prioritized trade negotiations with Washington. At the G7 summit in Canada last month, in Trump’s presence, she issued one of her strongest rebukes of China to date, accusing Beijing of “coercion” and “blackmail” in restricting exports of rare earths. The remarks drew a sharp response from China.
Business Roundtable
Despite the tensions, I understand that Brussels has dropped its long-standing opposition to holding a business roundtable on the margins of the EU-China summit. On July 25, in the city of Hefei, von der Leyen and Chinese Premier Li Qiang are expected to participate in the first such meeting since 2018, when their predecessors Jean-Claude Juncker and Li Keqiang met with European business executives. The hope in Brussels is that the meeting will give the European business community an opportunity to air its concerns about market conditions in China directly to Li. The EU has insisted, for example, that the European Chamber of Commerce in China, which has been openly critical of the business environment, participate. The risk, as one German business representative told me, is that individual companies will clam up out of fear of retaliation.
There are other risks. The Chinese, I am told, are trying to turn the meeting into a feel-good celebration of EU-China business ties, replete with a signing ceremony. They have proposed a visit to Volkswagen’s new production and development hub in Hefei, a poster child for the German auto industry’s high-risk bet on China. But as VW pours billions of euros into Hefei, it is slashing jobs at home. This is not the kind of backdrop that Brussels had in mind, and EU officials are pushing back. “Holding a business meeting like this comes with significant risks,” a European diplomat acknowledged. “China is on its home turf. They will be doing all they can to turn this into a win-win affair.”
Deep State
Brussels is not the only European capital sending mixed messages on China. In Berlin, German Chancellor Friedrich Merz is talking a tough game about reducing German dependencies and protecting critical infrastructure. But it is unclear, months into his new government, who will be leading this economic security push. Nor is it clear whether hundreds of billions of euros in new public funds for defense, infrastructure, and cybersecurity will be used to address some glaring China-related vulnerabilities. A former Deutsche Telekom and Vodafone executive has been tapped to run a new digital ministry, dimming hopes that the government could accelerate the phaseout of Huawei from its 5G telecommunications network. The company’s role as a key supplier for state-owned rail operator Deutsche Bahn also seems secure after one of the company’s longtime defenders in Berlin, Stefan Schnorr, was retained in a senior position at the transport ministry.
Economic Affairs and Energy Minister Katherina Reiche has asked staff to come up with proposals for a national economic security strategy, a policy promise set out in the German coalition agreement. Her ministry has been organizing industry workshops on sensitive technologies, from artificial intelligence and biotech to quantum and semiconductors. But some of Reiche’s key appointments have unsettled officials in other Berlin ministries who were hoping for new blood, and for new thinking on Germany’s economic model and continued reliance on China. “So far, we have not seen a clear strategic line from Reiche’s ministry on China,” one official lamented.
Wind Farm Test
That won’t matter if Merz, who is planning to make his first trip to China as chancellor in the autumn, provides German ministries with clear marching orders. A key test looms with a decision to approve the deployment of Chinese turbines in a major North Sea wind farm project. A report commissioned by the defense ministry earlier this year warned against the use of Chinese suppliers, arguing that they could hand Beijing “considerable blackmail potential”, including an ability to shut down turbines remotely. The Federal Maritime and Hydrographic Agency, an obscure government office in Hamburg, is expected to make its recommendation soon. The decision will say a lot about whether the government takes its own rhetoric about critical infrastructure seriously. “Will they have the guts to take a political decision?” one official asked. “The risk is that we have a repeat of the 5G saga, where the politicians look for technical solutions and push decisions down to the bureaucrats.”
There are also positive signs in Berlin. Foreign Minister Johann Wadephul has made it clear internally that his ministry should focus on implementing Germany’s 2023 China strategy, rather than revising it, as the coalition agreement foolishly promised. The German and French foreign ministries are coordinating more closely on China policy, including on the messages that will be transmitted to Chinese Foreign Minister Wang Yi when he passes through Berlin and Paris this week, following a first stop in Brussels. This is encouraging, but more is needed. The European Commission has been left to do much of the heavy lifting on China in recent years. Regardless of how the EU-China summit plays out, it is time for the big European member states to step up.