Donald Trump’s return to the presidency has reshaped Europe’s geopolitical landscape, renewing pressure on NATO allies and triggering a fierce trade war that threatens to destabilize the EU’s economic sovereignty. The US has imposed new tariffs on German autos and French agricultural goods, framing the EU as a security liability rather than a partner[1]. This move has intensified debates over whether Europe can maintain its separation of economic relationships from geopolitics, a principle that has underpinned the multilateral system for nearly seven decades[2].
The competition between the US and China is now simultaneously economic and security-driven, with both powers leveraging trade policy to pressure regulatory change and influence domestic politics in Europe[2]. As the US leverages the EU’s technological dependencies to extract concessions, the European Union faces an existential challenge that demands more than regulatory leadership alone[4]. The bloc is now racing to develop a European technological and industrial base—known as Eurostack—in critical sectors like semiconductors, AI, and cloud computing to reduce external dependencies[4].
Trump’s threat of troop withdrawals from Europe has forced an overhaul of the continent’s military posture, with stalled defence programmes and political instability in key capitals undermining decisive action[1]. The EU is increasingly looking to alternative alliances, including a potential “coalition of the willing” led by China, Brazil, and Mexico, to uphold a rules-based trade system that could benefit Europe[1]. This strategic pivot reflects a growing recognition that the EU can no longer rely on US security guarantees or economic stability.
Fiscal pressure in a low-growth environment further constrains the EU’s ability to invest in defence and industrial policy, creating a dangerous collision that risks turning fiscal management into permanent crisis mode[1]. As political space narrows, the EU must navigate a hostile geopolitical environment where regulation alone is insufficient to defend sovereignty. The race for economic sovereignty has become a matter of survival, with the European Investment Bank emerging as a quiet enabler of the bloc’s strategic autonomy[1].
