Many observers expected relations between China and the European Union to benefit from U.S. President Donald Trump’s broad assault on the global trading system. After all, China needs its other major trading partner to offset the impact of higher tariffs in the United States. For the EU, improved access to China’s domestic market and greater Chinese investment in Europe would help take the sting off of Trump’s tariffs as well as his demands to bolster defense spending.
However, those expectations seem to have been premature. At last week’s G7 Summit in Canada, European Commission President Ursula von der Leyen sharply condemned China for what she called “a pattern of dominance, dependency and blackmail” in its global trade practices. Warning of a “new China shock,” von der Leyen called out China’s use of export restrictions on rare earth minerals and massive subsidies as attempts to gain leverage and distort markets globally. “As China’s economy slows down,” von der Leyen charged, “Beijing floods global markets with subsidized overcapacity that its own market cannot absorb.”
This concept of overcapacity has become a central part of U.S. and EU criticisms of China’s trade policy, and for Brussels it has clearly become more salient, not less, in the face of Trump’s trade wars. But as with almost every other aspect of China’s trade relations with the West these days, the concept itself has become contested.