Geopolitics: Power and economic structures in transition

The world is changing, leading to shifts in frameworks shaping global affairs. The United States, once seen as a "benevolent hegemon" of a rules-based global order, now engages in a pure political power play. The current administration has raised the average effective tariff rate on U.S. imports from 2% to 18%. This shift is largely a response to China, which is pursuing similar goals through different means. By using export controls on rare earth elements, Xi Jinping demonstrated his power.

Europe, politically and militarily weak and lagging behind in technology, is struggling to adapt to this new environment. The EU’s actions often make it appear a helpless pawn of foreign powers. Ironically, the U.S.’s protectionist stance is more a sign of weakness. America’s share of global trade is falling (down to 13%), and despite tariffs, 70% of global trade is still conducted under WTO rules.

Many countries value rules-based trade and are eager to strike trade agreements with the EU and its single market of 450 million people: Mercosur, India, Indonesia, other ASEAN nations, and Australia – countries with large populations, vast reserves of strategic minerals, and high GDP growth. The EU must seize these opportunities, and would also do well to reduce internal trade barriers.

Meanwhile, the EU-U.S. trade agreement is on shaky ground. The EU has committed to $600 billion in investments in the U.S. and $750 billion in energy imports, yet it’s unclear how these promises will be fulfilled. If these “deals” fall through, the entire agreement would be rendered meaningless.

At the same time, Russia’s aggression continues to destabilize Europe. With the U.S. no longer seen as a reliable ally, Europe must rethink and rebuild its security architecture – a Herculean task. On top of that comes the financial burden: given empty public coffers, responsibility will likely fall to Germany to establish conventional military deterrence. Whether the public will accept these burdens remains to be seen. So far, disappointing efforts to reform Germany’s social security systems and improve competitiveness paint a worrying picture for the future.

In the Middle East, a ceasefire brokered under U.S. leadership has brought temporary calm. Whether it will lead to lasting peace is doubtful. The Netanyahu government appears to view the deal as a missed opportunity to annex Gaza and the West Bank. Hamas, for its part, agreed only out of exhaustion. The conflict remains unresolved. The living conditions of Palestinians and their recent experiences fuel the potential for further violence. There is hope that Syria might now act as a stabilizing force – but even that is uncertain, as is Iran’s trajectory. The region remains a powder keg.

Relations between the West and China continue to be strained. The recent trade deal between Washington and Beijing is only a temporary truce, allowing both sides to reduce vulnerabilities. The systemic rivalry persists. Europe shares many of America’s concerns about Beijing but faces its own strategic limitations, given its reliance on China’s supply chains and consumer market. Past warning signs (i.e., forced technology transfers) were largely ignored. Meanwhile, the new five-year plan reinforces the CCP’s strategic policy approach, something often lacking in European capitals.

East Asian countries continue to seek close ties with the U.S. despite tariff conflicts, while Southeast Asia is pursuing regional integration alongside deeper cooperation with Beijing. Unless the EU initiates new bold partnerships, it risks falling further behind in these regions.