Watching China in Europe—August 2025

Inflection Point

The phrase from the July 24 EU-China summit that may live on, in spite of the Beijing meeting’s barren outcomes, is “inflection point”. European Commission President Ursula von der Leyen used the term in her meeting with China’s President Xi Jinping to underscore Europe’s frustration with years of stonewalling from Beijing on the topics that worry Brussels most: growing imbalances between the world’s second and third largest economic blocs and China’s unrelenting support for a revanchist Russia. It was a warning to China’s supreme leader that a relationship that has been spiraling slowly downward for most of the past decade will lurch even lower unless China takes Europe’s concerns seriously and acts on them.

It should be clear by now that China has no intention of doing either. Even EU Trade Commissioner Maroš Šefčovič, who emerged from a March visit to Beijing confident that some sort of package deal might be achieved, has been transformed into a China realist in the span of a few short months. “China did not move an inch,” a senior EU official told me. “We expected them to offer up some cosmetic concessions but even that didn’t happen.” Another EU official put it this way: “The Chinese have shifted gears. They are convinced that they managed the US. And they are confident that they will manage us even better.”

New Normal

The summit did produce a joint statement on climate, but that contained only vague pledges of future action. There was an agreement to establish what von der Leyen described as an “upgraded export supply mechanism”—code for what Brussels hopes will be a fast track for resolving rare-earth bottlenecks. But in private, European officials say that the weaponization of critical raw materials by China is likely to become the new normal. “We all understand that China is not going to let go of this wonderful mechanism,” the senior EU official said.  They expect Beijing to exploit the mechanism to try to establish a quid pro quo between rare-earth flows from China and the loosening of European technology controls.

There was next to no talk about resolving the tit-for-tat trade dispute that unfolded after Europe imposed tariffs on Chinese electric vehicles last year. I was told that Beijing never made anything approaching an acceptable offer on minimum import prices for its EVs. It is now unclear, officials told me, whether Šefčovič and his opposite number, Wang Wentao, will hold a high-level economic dialogue in the autumn. A few months ago, some officials in Brussels dared hope that the two sides might be able to cobble together something resembling a trade truce at that meeting. In a sign of the disconnect, the Chinese side floated a revival of the Comprehensive Agreement on Investment (CAI).

Meanwhile, the EU’s criticism of China for its support of Russia is being met by a tough new message from Beijing. Whereas in the past, the Chinese would deny and deflect, they have grown increasingly defiant in recent months. After Chinese Foreign Minister Wang Yi’s cold admission during a visit to Brussels in early July that support for Moscow was part of a concerted strategy to keep the United States off balance, Xi made clear at the summit in Beijing that he was tired of hearing Europeans complain about his dual-use infused bromance with the Kremlin killer. China has informed the EU that it plans to retaliate for its sanctioning of two Chinese banks that have been facilitating banned trade with Russia.

All the Tools

And so the ball is now in Europe’s court to deliver on the threat implicit in von der Leyen’s “inflection point” language. China is betting on a divided Europe that is unable to deliver on its de-risking pledges, take advantage of its economic leverage, or accept the costs that an economic escalation would entail. With its rare earth controls, China has given Europe a glimpse of the havoc it can wreak if the trade battle gets hot. But if Europe fails to push back forcefully, throwing all the defensive trade tools it has at China, the long-term damage to its industrial base is likely to be profound.

That is the key takeaway from a confidential survey of nearly two dozen industrial sectors that the Federation of German Industries (BDI) finalized in recent weeks. The BDI asked these industries to assess their current position vis à vis Chinese competitors in the EU market and offer their outlook for the years ahead. From biotechnology and medical technology to chemicals, steel, machinery, textiles, and telecommunications, one after another sector describes a darkening competitive landscape, characterized by a familiar dynamic: aggressive pricing policies by state-supported Chinese companies that are shielded from foreign competition in their home market.

Hopelessly Inferior

The German medical technology sector, for example, speaks in the survey of “significant market distortions” from China and calls the country’s rare-earth dominance a growing competitive threat. The biotechnology sector predicts that without coordinated industrial policies, Europe will lose its technological sovereignty and innovative strength. The chemicals sector warns of “new, exploitable dependencies on basic chemicals” from China and calls for more resources to be devoted to trade defense in Brussels. In raw materials and mining, German firms are described as “hopelessly inferior to their Chinese competitors”. Even Germany’s head-in-the-sand auto sector (“Chinese OEMs have yet to prove themselves”) sees “fierce international competition” in technologies of the future such as connected and autonomous driving.

What can Europe do in the face of this daunting industrial challenge? Clinching a trade agreement with the United States on July 27th was a good first step, even if the deal leaves the EU much worse off than it had hoped just a few months ago. Second, it must develop a credible plan, together with allies, to fast-track the diversification of its rare-earth supply chains. Third, the EU’s biggest states (with Germany and France in the lead) must assume a leadership role in driving the European de-risking agenda, instead of leaving the heavy lifting to the Commission. It will be essential for German Chancellor Friedrich Merz to set a new “Europe first” tone during his planned trip to China in late October that reflects the economic realities from the BDI report. French President Emmanuel Macron could reinforce the message when he visits China toward the end of the year.

Trump and China

Whether Europe will be able to work with the United States on China policy is less and less clear. I understand that senior US diplomats asked for a coordination call with their European counterparts before the EU-China summit, but were then too busy to hold one. US negotiators have demanded very little from Europe on China policy during months of trade talks, and the preliminary deal clinched on July 27th does not appear to contain any China-related elements. Neither the G7 nor the NATO summit in June produced statements that mentioned China. That was because US President Donald Trump, unlike his predecessor Joe Biden, had no interest in publicly criticizing Beijing.

Trump’s recent decision to greenlight the export of Nvidia’s H20 artificial intelligence chips to China, three months after banning their sale, raises questions about how far he could go in turning US policy toward China into a personal, transactional game that prioritizes business interests over broader strategic aims. Trump has been clamoring for a meeting with Xi for months, and US officials in charge of export controls have been told to avoid tough moves against China in order to secure a face-to-face, according to Financial Times. Last week his Treasury Secretary Scott Bessent, in announcing plans to meet his Chinese counterpart He Lifeng in Stockholm, said this: “I think we’ve actually moved to a new level with China, where it’s very constructive. We’re going to be able to get a lot of things done, now that trade has kind of settled in at a good level.”

I hesitate to read too much into this. My assumption, since Trump re-entered the White House, has been that he would look for a deal with China, fail to get anything of substance (as in his first term), and return to the well-trodden path of confrontation with Beijing. But after the past weeks I am no longer as sure of the trajectory. Half a year into the Trump administration, the China hawks are on the back foot and Trump is sounding as unctuous with Beijing as he was with Moscow in his first months in the White House. It would be a supreme irony if Europe was accelerating its turn away from China just as Trump was leaning back in.