Last week, business leaders from Germany and China convened in Düsseldorf for an economic dialogue focused on trade and investment. However, the dominant issue remained the escalating rivalry between the United States and China, which loomed over the discussions as leaders prepare for talks in Washington this week.
President Donald Trump and President Xi Jinping are scheduled to meet in an effort to ease the trade war initiated by Trump. Their previous encounter at a Beijing summit in May yielded no concrete results. Mikko Huotari, director of the Berlin-based think tank MERICS, described the current climate as a “strategic stalemate,” noting that both leaders prefer time over a breakthrough. While a deal could benefit Trump’s Republican Party ahead of the November midterm elections, the outcome remains uncertain. “We will discuss everything,” Trump stated regarding the upcoming meetings.
Beyond traditional trade, the competition is intensifying in artificial intelligence. The US continues to prohibit the export of high-performance chips to China, while Beijing restricts the export of rare earth elements crucial for semiconductor manufacturing. There is anticipation that AI safety mechanisms will be discussed, with US Treasury Secretary Scott Bessent confirming that officials have explored creating a notification system for AI-related security incidents.
For Europe, the situation is increasingly precarious. European Commission President Ursula von der Leyen described the current moment as a second “China shock” in her 2026 State of the Union address. She argued that China’s advancements in battery technology, green energy, and mobility are driving deindustrialization in Europe’s heartlands. While the EU seeks to transition to e-mobility and reduce CO2 emissions, it is also considering tariffs on low-cost Chinese electric vehicles. German automakers Volkswagen and BMW oppose these punitive measures, citing potential losses from Chinese retaliation.
A Chinese executive in Düsseldorf told DW that China’s domestic consumption is insufficient to absorb its manufacturing output, forcing companies to seek foreign markets. Meanwhile, Yang Xiepu of the Chinese Academy of Social Sciences noted that Washington is pressuring allies to tighten restrictions on China across technology and security sectors.
Complicating matters further, Trump has threatened the EU with tariffs while simultaneously destabilizing NATO relations. When the EU offered Canada associate membership, Trump labeled the move “ridiculous” and warned of severe economic consequences, though he did not define what he considered a hostile act.
In response to such volatility, Canadian Prime Minister Mark Carney has adopted a strategy of hedging bets. Speaking at the 2026 World Economic Forum in Davos, Carney declared that the old international order is not returning and urged middle powers to cooperate rather than negotiate bilaterally with hegemons. “If we’re not at the table, we’re on the menu,” he said. Canada recently lowered import tariffs on Chinese electric cars from 100% to 6.1%, a move made after Carney established a “new-era strategic partnership” with Beijing earlier in the year.
Huotari observed that China is launching charm offensives toward “fragile allies,” with Xi attending recent BRICS and Shanghai Cooperation Organization summits. As Carney prepares to attend the APEC summit in Shenzhen, the challenge for middle powers remains clear: navigating a world where great powers go it alone, and smaller nations must forge new alliances based on shared interests to avoid being marginalized.
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