Middle Powers Navigate US-China Rivalry as Leaders Prepare for Talks

Last week, German and Chinese business leaders convened in Düsseldorf for an economic dialogue focused on trade and investment, though the underlying US-China rivalry dominated the atmosphere. This comes as President Xi Jinping and President Donald Trump prepare to meet in Washington, with hopes that the summit may yield progress in easing the trade war initiated by the US president. Previous discussions, such as the Beijing summit in May, failed to produce concrete outcomes.

Mikko Huotari, director of the Berlin-based China think tank MERICS, described the current dynamic as a “strategic stalemate.” He noted that Beijing’s assumption is that both nations will continue to check each other indefinitely. “Xi really doesn’t need a breakthrough in Washington. He needs more time. And the same is true for Washington,” Huotari stated during a recent policy briefing.

While a potential deal could benefit the Republican Party ahead of the November midterm elections, the outcome remains uncertain. President Trump confirmed that “we will discuss everything” during Xi’s upcoming visit to the White House.

The competition extends beyond traditional trade into artificial intelligence. The US maintains prohibitions on exporting high-performance chips to China, while Beijing restricts the export of rare earth elements essential for semiconductor manufacturing. There is anticipation that the leaders may discuss AI guardrails; Xi has advocated for international cooperation in AI development, whereas Trump views regulation as a potential threat to US leadership. US Treasury Secretary Scott Bessent recently mentioned that officials have discussed establishing a notification mechanism for AI-related security incidents.

For Europe, both superpowers present significant challenges. European Commission President Ursula von der Leyen warned in her 2026 State of the Union address that a second “China shock” is already impacting the continent. Unlike the first shock 25 years ago, which involved cheap consumer goods, this new wave stems from China’s technological advancements in battery technology, green energy, and mobility, leading to deindustrialization risks in Europe’s industrial heartlands.

The EU is pushing for a rapid transition to e-mobility while calling for tariffs on low-cost Chinese electric vehicles. However, Chinese officials deny unfair advantages, and major German automakers like VW and BMW oppose punitive tariffs due to fears of retaliatory losses.

Meanwhile, the US is pressuring allies to tighten restrictions on China across technology, supply chains, and security. Trump has also threatened the EU with tariffs, creating instability within NATO. When the EU proposed “associate membership” for Canada, Trump dismissed the idea as “ridiculous” and warned of severe trade consequences.

In response to this volatility, Canadian Prime Minister Mark Carney has adopted a strategy of hedging bets. Speaking at the 2026 World Economic Forum in Davos, Carney argued that middle powers must collaborate rather than negotiate bilaterally with hegemons, stating, “If we’re not at the table, we’re on the menu.” Canada recently lowered import tariffs on Chinese electric cars from 100% to 6.1% after establishing a “new-era strategic partnership” with Beijing.

China has simultaneously launched a diplomatic offensive toward US allies, with Xi attending recent BRICS and SCO summits. Carney described this approach as “variable geometry,” forming different alliances based on shared values and interests. As the G-20 summit approaches in November, middle powers hope to secure a seat at the table rather than becoming pawns in the great power contest.