G7 leaders are clashing over U.S. export controls on AI models and China's dominance in critical supply chains, exposing deep divides that may block consensus on technology policy.

What happened: The Trump administration placed export controls on Anthropic's Fable 5 and Mythos 5 models, restricting access for non-U.S. users—a move described as a 'key topic' at the G7 summit in France. China, though not formally invited, held an 'unprecedented' call with French president Emmanuel Macron ahead of the summit, underscoring its shadow presence in the discussions.

Why it matters: The U.S. and China control 90% of global computing power and attract most AI investment, while nearly eight in 10 AI companies started last year in the G7 were based in the U.S. This leaves the other six G7 members squeezed between reliance on U.S. AI technology and dependence on Chinese manufacturing and critical minerals for green energy and semiconductor infrastructure. Experts say the two leading AI powers leave 'not much space for other G7 economies to play a driving role,' making unified G7 AI policy unlikely.

What to watch: Europe is caught between two critical dependencies—U.S. software-based AI infrastructure and China's control of the physical supply chains (critical minerals and manufacturing) needed for the green energy transition. According to experts and a memo prepared for the G7, losing either supply would be 'pretty catastrophic,' but solving both dependencies simultaneously is the hard question facing European policymakers.