Donald Trump's return to the White House has renewed pressure on NATO allies, raised the spectre of troop withdrawals, and triggered a bruising trade clash that directly threatens the European Union's economic sovereignty[3]. This geopolitical shift has forced Europe to confront the reality that neither China nor the United States now separates economics from geopolitics, turning global competition into a simultaneous economic and security contest[4]. The EU's traditional separation of external economic relationships from geopolitics is now a liability, leaving it vulnerable to the hardening political rivalries between the two superpowers.
In response to the US-China trade war, a "coalition of the willing" led by China, Brazil, Mexico, and others is joining forces to uphold a rules-based trade system that could paradoxically benefit the EU[3]. This emerging bloc, committed to the World Trade Organisation, represents an unexpected ally for Europe as it seeks to defend multilateralism against the unilateralism of the US and the strategic coercion of China[3]. However, aligning with this group requires Europe to navigate a delicate path between its security dependence on the US and its economic interests with the rest of the world.
The threats to the EU's economic sovereignty are multifaceted, with China and the US simultaneously engaging in economic competition and security competition that undermines the multilateral system Europe has relied on for nearly seven decades[4]. The EU's ability to maintain its economic sovereignty is now contingent on its capacity to forge new alliances and decouple its critical industries from foreign dependencies, a task that is becoming increasingly difficult in a low-growth environment[3]. The risk is that Europe will be forced into a defensive posture, locking itself into short-term crisis management rather than strategic long-term planning.
Experts see external threats looming large, from the escalation in Ukraine to the hardening of political rivalries between the US and China, which are reshaping the global economic landscape[3]. The EU's response must be a renewed focus on growth and competitiveness, as outlined in the Florence Report, to ensure it can sustain its defence and industrial policies without sacrificing its social contract[1]. Without a credible growth agenda, the EU risks becoming a pawn in the larger US-China contest, with its economic sovereignty eroded by the very powers it seeks to balance.
The European Investment Bank remains a core ally for the EU, acting as a quiet enabler of the bloc's strategic autonomy in the face of these external pressures[3]. As the EU navigates this new geopolitical reality, the EIB's role in financing critical infrastructure and defence capabilities will be crucial in maintaining Europe's economic sovereignty. The coming years will test whether the EU can successfully decouple its economic interests from the security competition between the US and China, or whether it will be forced to align with one side at the expense of its own strategic autonomy.