June 18 2025 - 5:45pm
This week’s G7 meeting in the Canadian Rockies has been overshadowed by the escalating conflict between Israel and Iran. But European Commission President Ursula von der Leyen has made headlines on a rather different subject. During a session with world leaders at the summit, she said that China was the G7’s biggest problem.
“We strongly feel that the biggest challenges are not the trade between G7 partners,” von der Leyen said. “Rather, the sources of the biggest collective problem we have has its origins in the accession of China to the WTO in 2001.”
The European Commission head criticized China for hanging on to its development status at the WTO, and for being unwilling to live within the constraints of the rules-based international system. She also accused Beijing of undercutting intellectual property protections and paying massive subsidies to dominate global supply chains. According to her comments earlier this week, the country floods global markets with subsidized overcapacity that its own market cannot absorb.
It was only in late January that von der Leyen struck a different tone, emphasizing the need to discuss common interests, to engage constructively with China, and to find solutions in Beijing and Europe’s mutual interest. What has happened in between is that the EU has looked into the abyss of a trade war with the US and is pulling back. MLex writes that the EU-US trade talks have moved into what it calls a more granular stage, in which the two sides are discussing specific product groups, such as EU exports of civil aircraft and pharmaceuticals.
The key sticking points are US access to EU agricultural markets — which Brussels is unlikely to accept — Airbus, car tariffs, and pharma and digital taxes. There is no way that they can get through all of this by 9 July, and the US administration has already signaled a willingness to extend the tariffs deadline. The White House is saying that the EU is now seriously engaged in the talks, but the sheer complexity means that the trade deal will be the last.
Von der Leyen is putting EU support for Trump’s China policy on the table. The question is: does anyone really know what Trump’s China policy is? It is quite possible that the US will end up relaxing some of its own export controls to Beijing. For example, it might ease the ban on sales of high-performance semiconductors. That was a miscalculation by the Biden administration, which thought it could arrest China’s high-tech development by restricting access to semiconductors, as though this was a skill Beijing would forever be unable to develop.
Von der Leyen’s comment coincides with adverse shifts in EU-China trade. Chinese customs data shows an increase in monthly exports to Germany and France by over 20% in both April and May. The EU writes in its trade diversion monitor that LED imports went up by 156%, presumably from China, while their price dropped by 65%. Industrial robots imports went up 315%, with a fall in price of 35%.
Trump’s tariffs had a big impact on global trade patterns. Some of this will shake out, as the edges of these tariffs are taken away. Even if the EU were to react by slapping import tariffs on Chinese goods, it still faces competition in other markets. And there is a limit to what it can do, as the CCP can bring about serious harm to the investments made by EU companies in China.
The EU cannot solve its problems through trade policy alone. It has to address the underlying problem by making itself less dependent on export surpluses.
This is an edited version of an article originally published in the Eurointelligence newsletter.
