Challenges and opportunities between geopolitics, trade and industrial policy

The year 2026 opened with a series of geopolitical shocks that immediately brought the issue of strategic autonomy back to the centre of the European agenda. In January alone, international trade was again explicitly used as an instrument of political pressure: US President Donald Trump once again threatened a selective increase in tariffs against European countries that had contributed military contingents to the Greenland mission, once again signalling the fragility of the transatlantic bond and the readiness of the US to use trade leverage for geopolitical objectives.

A few days later, at the World Economic Forum in Davos, the Canadian Prime Minister spoke openly of a 'fractured new world order', emphasising how systemic tensions are reshaping economic and political alliances. At the same Forum, Ursula von der Leyen acknowledged that 'the world has changed permanently' and that this change can be turned into an opportunity to build a 'new form of European independence', not isolation, but the ability to reduce structural, economic and political dependencies and to act as a credible global player, accelerating the construction of strategic autonomy.

The first month of the new year also saw the approval by qualified majority, after more than 25 years of negotiations, of the agreement between the EU and Mercosur, and the European mission to India these days, part of a broader strategy of trade and diplomatic diversification. On this front, the EU has also put in place new instruments, straddling trade and industrial policy for the green transition, such as the Clean Trade and Investment Partnerships (Ctip), designed to create mutually beneficial partnerships and make supply chains more resilient, particularly for critical materials and clean technologies.

Strategic autonomy, which is a necessary condition for being able to remain open to international trade while defending against the coercive use of trade policy, will however also depend on the effectiveness of European industrial policy and its ability to reduce obvious vulnerabilities, especially in the digital domain. The structural dependence on the United States in key sectors such as semiconductors, clouds, and artificial intelligence exposes Europe to the risk of external constraints, not only economic but also regulatory and fiscal, as shown by the recurring pressures on the European discipline that regulates technological giants. Without common instruments, the EU's ability to exercise its regulatory sovereignty risks being eroded.

While trade policy allows the Union to overcome divergences through qualified majority voting, industrial policy remains fragmented between national policies. The massive use of state aid derogations, while justified by the emergency, is producing a multi-speed Europe, where countries with more fiscal space support their companies more aggressively, with the risk of fragmenting the single market.