The European Union in the Age of Technological Geopolitics

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Introduction

The European Union finds itself in a vulnerable position as the foundations of globalisation – upon much of its prosperity was built – have begun to fracture. What once seemed like a stable, interconnected global economy is now giving way to a new era of strategic competition, where interdependence becomes a liability rather than a safeguard. This transformation has not been sudden, but rather the result of a series of gradual yet significant shifts over the past decade.

Concerns about China’s technological rise first surfaced during the Obama administration, but it was under the more confrontational Trump presidency that these fears crystallised into a strategy of economic coercion. The United States weaponised interdependent networks, exploiting mutual dependencies, such as those in the semiconductor supply chain, to exert coercive pressure through the power imbalances that these networks create over time.  

In doing so, the U.S. opened Pandora’s box by exploiting key chokepoints to curb China’s technological ascent, it exposed vulnerabilities at the core of globalisation itself, forcing governments to reassess their dependencies and strategic risks. This marked a decisive turn toward a more fragmented world.  

Europe’s path, however, unfolded differently. While recognising China’s growing influence, European leaders remained committed to defending the global system they had helped to build. Only after the twin shocks of the COVID-19 pandemic and Russia’s invasion of Ukraine did Europe begin to pivot its efforts to strengthen industrial resilience to reduce dependencies. Yet, the recent reelection of President Trump has reintroduced profound uncertainty and renewed doubts about Europe’s future.

The Third Offset

After the Cold War, the American Government, supported by European states, pursued a strategy of integrating every state across the globe into the liberal international order. This is underpinned by the belief that economic interdependence would reduce the likelihood of conflict, as countries tied together through trade and investment would have more to lose from confrontation. But beyond this theory, global economic integration was also driven by strong commercial motivations. Even during the Cold War, Western companies had begun offshoring production to, among others, Asian countries to reduce costs and lower consumer prices and this was viewed as a positive-sum arrangement that benefited both countries. After the Cold War, global economic integration accelerated significantly and became the dominant economic paradigm that would be actively promoted by Western Governments around the world.

However, after decades of championing this model, the United States began to shift away from it. While the Huawei ban brought this change into the spotlight, the groundwork had already been laid. As early as 2014, the U.S. Department of Defense (DoD) – through its “Third Offset” strategy – had started to frame China as a strategic competitor, raising geopolitical concerns.

This Third Offset strategy, led by Deputy Secretary of Defense Robert O. Work, aimed to develop new cutting-edge military technologies. Its goal was to ensure that the United States maintained a strategic advantage over the growing technological capabilities of China and Russia. This approach echoed the Cold War strategy, where the U.S. prioritised quality over quantity in its military equipment. However, it soon became clear that technological innovation was increasingly being driven by the civilian sector, as opposed to the traditional American defence contractors.

More concerningly, the U.S. Department of Defense realised that China and Russia could access American civilian technology with relative ease, allowing them to close the gap far more quickly than anticipated. In fact, the ease of technology transfer to China was so significant that it effectively rendered the Third Offset useless. While the Obama administration maintained its official China policy (which favoured economic engagement as a path to global stability), the DoD began to recognise the need to streamline long-term economic, technological, and security goals, as the balance between openness and security was not functioning as intended.Although the Third Offset was phased out by 2018 due to its limited results, it played a pivotal role in reshaping U.S. strategic thinking towards China. This shift was reflected in the 2018 National Defense Strategy (NDS), which, though not explicitly referencing the Third Offset, adopted many of its core principles – most notably the declaration that “inter-state strategic competition, not terrorism, is now the primary concern in U.S. national security” and that “China is a strategic competitor."

Trump, Huawei, and Weaponising Semiconductors

In June 2016, during a rally in Pennsylvania, Trump openly criticised globalisation for undermining the American working class and called for a more aggressive approach toward Chinese economic practices. When Donald Trump officially entered office in 2017, the conditions were ripe for a departure from U.S. traditional post-Cold War policy.

The strategic reorientation took definitive shape in May 2019, when the U.S. Government placed Huawei and its affiliates on the Entity List. This move required American companies to obtain licenses – unlikely to be approved in this case – before supplying Huawei with goods and services. The ban marked a turning point in U.S. foreign economic policy, shifting from liberal engagement to active containment.

Huawei’s rapid ascent encapsulated the challenge at hand. Over the course of approximately thirty years, the company evolved from creating simple phone switches to creating the most advanced telecom and networking gear, designing advanced smartphone chips, and becoming Taiwan Semiconductor Manufacturing Company’s (TSMC) second biggest customer. Huawei and another Chinese company, ZTE, were far ahead of their competitors in 5G development, owning 40% of the global 5G infrastructure in 2019. Under the economic globalisation paradigm, Huawei’s rise could be hailed as a success story. But in the emerging security context, Huawei’s rise was perceived as a strategic threat to U.S. technological and national security.

Initially, the U.S. justified its actions against Huawei on the grounds of national security, citing concerns over espionage and unauthorised surveillance. However, by 2020, the restrictions were significantly expanded. First in May, and then once more in August. According to the new restrictions any foreign-made product using American software or technology – including those comprising more than 25% U.S. content – could no longer be sold to Huawei without a license. This revealed a broader objective beyond merely keeping Huawei out of the American market, it also sought to cripple its global operations and halt its momentum in technological development.

This strategy hinged on the central role of advanced semiconductors – the ‘brains’ of technological devices – access to which is deemed essential to avoid falling behind in the technological race. The chip supply chain is hyper-globalised with specialised firms occupying each stage of production. Because no single firm or country can manage the entire production process alone while remaining technologically competitive, the industry has evolved into a multinational ecosystem optimised for cost-efficiency and innovation, during this process, the semiconductor supply chain became heavily monopolised due to its winner-take-all dynamic in the industry, creating strategic choke points vulnerable to geopolitical leverage. Companies like TSMC hold near-monopolies in key segments, producing over 90% of the world’s advanced semiconductors, making them irreplaceable to the global tech ecosystem.

U.S. firms account for 39% of the total value added in the advanced semiconductor supply chains, controlling 96% of Electronic Design Automation (EDA) tools and 52% of core intellectual property. Cutting Huawei off from this effectively cripples its ability to produce cutting-edge semiconductors. Bridging the gap would take massive investments and years of research just to reach today’s U.S. level, by which point the U.S. will have already advanced further. To make matters even more difficult, the aforementioned updated Entity List restrictions also prevent foreign companies such as TSMC from manufacturing chips for Huawei. As a result, Huawei’s global smartphone market share quickly collapsed from 20% to just 4% as it was unable to compete in this technological race.  

The European Union 2020

It would be reductive to suggest that the EU simply mirrored the United States in adopting its new strategic priorities. As both an architect and beneficiary of economic globalisation, the EU had little incentive to abandon a system from which it profited from extensively. Europe’s eventual recalibration was largely reactive, prompted by a series of emerging challenges.

Even before Huawei was placed on the Entity List, signs of a shift were evident in Europe. In January 2019, Germany’s most powerful industrial lobby – the Bundesverband der Deutschen Industrie (BDI) – released a policy paper titled “China – Partner and Systemic Competitor” which raised concerns on China’s state-led economic model, epitomised by initiatives like Made in China 2025 threatening Germany’s competitiveness. Influenced by the BDI in March 2019, the European Commission released the EU-China Strategic Outlook, declaring China a “partner, competitor, and systemic rival” for the first time. On May 15th, 2019 – the day Trump began his offense on Huawei – The Netherlands released “Netherlands-China: A New Balance."

Still, Europe’s main challenge was not only China’s rise, but also the growing fragmentation of globalisation that occurred from 2020 onwards. The EU’s deep economic interdependence left it exposed. When the COVID-19 pandemic arrived in early 2020 Europe’s dependence on American companies for vaccines and Chinese face masks revealed critical vulnerabilities in Europe's supply chains. The pandemic also induced a major semiconductor shortage. This led to European Commission’s President von der Leyen to allude in her 2021 State of the Union Address that Europe has to focus on increasing its share within the semiconductor supply chain and to enable greater technological sovereignty.

The second major turning point was Russia’s invasion of Ukraine in early 2022. The conflict served as a stark reminder of Europe’s vulnerabilities, further pushing security and unity higher on the EU’s agenda amid an increasingly unstable geopolitical environment. In response to the invasion, the EU and U.S. weaponised weak points, cutting Russia off from the global economic system through measures like excluding it from the SWIFT network. Europe’s strong response marked its reentry into power politics. However, the West weaponising SWIFT led to Russia weaponising its gas supply to Europe in retaliation. Initially intended as a means of economic integration with Russia, the reliance of some European countries on Russian energy now further exemplified the risk of dependencies. Furthermore, China’s stance on Russia during the conflict pushed more European officials to see China not just as an economic partner, but as a strategic challenger in the future. 

The problem with weaponised interdependence is that it undermines the presumed neutrality of global economic ties. When dependencies become strategic liabilities, the logic underpinning globalisation is fundamentally called into question. As Farrell and Newman write: “the EU relied on America for security, Russia for energy, and China for trade." Such a dynamic was not problematic under the traditional philosophy of economic globalisation, however, it became increasingly obvious that the EU could not keep downplaying such vulnerabilities. The more that weaponisation occurs, the more it encourages governments around the world to reduce their economic vulnerabilities. 

A New Normal: Biden and the EU

When Biden became the new president of the United States in January 2021, he did not reverse what Trump had caused – instead, he doubled down on it. As Biden’s 2022 National Defense Strategy outlines, the world entered a “decisive decade” due to changes in geopolitics, technology, economics, and the environment, necessitating an advance in their defence and security goals. From 2020 to 2024 the Biden administration further delved down the semiconductor supply chain to utilise its hegemonic weaponisation strategies and exert economic pressure on China. Where Trump’s semiconductor export controls focused on stopping Huawei and its affiliates from creating advanced semiconductors, Biden’s focus was now on stopping China as a whole from being able to develop cutting-edge advanced semiconductors. 

Biden acknowledged the arrival of a new geopolitical reality – one in which reducing dependencies in critical sectors became essential, and reengaging with allies a strategic priority. The CHIPS and Science Act, passed in August 2022, embodies this shift. It set out to invest $53 billion into reducing reliance on global supply chains by reshoring semiconductor manufacturing to the United States, marking a clear departure from the country’s traditional commitment to economic globalisation. The Act offers generous financial incentives for companies to establish operations on U.S. soil. However, this support comes with a condition: domestic and foreign recipients are barred from conducting business with China if it could help advance their technological capabilities for ten years, without prior approval from the U.S. Department of Commerce. The provision underscores how Washington is leveraging a combination of economic tools and coercive conditionality to attract foreign firms while simultaneously shaping strategic decoupling from China. 

The Biden administration also sought to restore its diplomatic relations with its allies, recognising the value of cooperation in this new geopolitical era. In the context of advanced semiconductor supply chains, the U.S. faced little resistance in securing alignment from other key players. These partners were already deeply integrated with the U.S. and shared a mutual interest in preserving their established positions within the supply chain. This alignment facilitated the establishment of the Chip 4 alliance, comprising the U.S., South Korea, Japan, and Taiwan, which aimed to safeguard technological leadership and address shared concerns about China’s growing influence in the industry. Together, they represent approximately 82% of global semiconductor production. On the European front, the creation of the EU-U.S. Trade and Technology Council in 2021 marked a renewed effort to coordinate key issues such as supply chains, export controls, and technology standards – further signaling the West’s collective turn toward strategic economic policy.

About a year after the American CHIPS and Science Act was launched, the European Chips Act went into force on the 21st September 2023. The Act aims to mobilise €43 billion to increase the EU’s global semiconductor market share from 10% to 20% by 2030. More precisely, it seeks to invest in R&D and semiconductor manufacturing, to reduce dependency risks, and to create or attract industrial facilities that can manufacture semiconductors within the EU. While less ambitious than America's techno-nationalist stance, both Acts complement each other. The European Chips Act demonstrated Europe’s recognition that it can no longer rely on the global economy in critical sectors, highlighting the need for long-term industrial policy objectives to secure strategic autonomy and strengthen its technological competitiveness.

The European Union in 2025 and Trump 2.0

The growing recognition of strategic dependencies marked a turning point for the European Union, revealing the urgent need to strengthen its security and resilience in an increasingly turbulent world. Comparing the EU’s situation of 2019 to that of 2025 illustrates a dramatic shift: in 2019, the EU was still operating within the paradigm of economic globalisation, largely focused on open markets and interdependencies. By 2025, the Union was heavily prioritising strategic autonomy and enhancing its internal capacities.

The tariffs it imposed on Chinese electric vehicles highlights its growing willingness to prioritise market protection over liberal trade norms. On a broader level, resilience-building through industrial policy has become a key objective on their policy agenda, reflected in initiatives such as REPowerEU (2022), the Net-Zero Industry Act (2024), and the Critical Raw Materials Act (2024). Together, these measures underscore a broader vision for a more self-reliant Europe.

Although the European Union has set a vision for greater autonomy, achieving this implies a generational effort requiring sustained political will and financial commitment. As highlighted in the September 2024 Draghi report, closing the innovation gap with the United States and China – particularly in areas like artificial intelligence, semiconductors, and quantum technology – requires investments close to €800 billion annually. Advanced chips, as previously noted, became globalised by necessity, relying on a web of highly specialised firms to drive efficiency and innovation. The report therefore stresses that becoming competitive in this sector and strengthening Europe’s semiconductor supply chains will require hundreds of billions of euros to achieve, and in the short-term, the price-per-chip may significantly increase.

Thus while the European Union’s long-term position remains uncertain given the scale of the challenges it faces, its renewed relationship with the United States under the Biden administration offered a degree of strategic reassurance. Entering this new geopolitical era with a powerful and like-minded ally provided the EU with both support and a shared direction.

This trajectory shifted dramatically with the reelection of President Trump. His second term appears determined to dismantle what remains of economic globalisation. Since January, he has embraced a renewed form of economic nationalism on an unprecedented scale, marked by aggressive reshoring efforts, sweeping tariffs, and a staunch “America First” industrial agenda. These shifts in U.S. strategy have placed Europe in an increasingly precarious position, raising doubts about the reliability of its transatlantic partner. Concerns intensified when the United States threatened to cut Ukraine’s access to the crucial Starlink satellite communication service if Ukraine refused to enter negotiations with Russia to end the war.

For Europe, this serves as a warning: its reliance on American digital platforms could become a significant strategic vulnerability in the future, particularly as the United States increasingly distances itself from its European allies. Once again, the use or threat of weaponising critical infrastructure reinforces the desire among governments to reduce their exposure to such strategic vulnerabilities. Additionally, the Trump administration is currently actively exploring placing tariffs on semiconductors and advancing policies to accelerate domestic production, casting uncertainty over future transatlantic cooperation in this strategic sector. The outcome of its assessment could define the course of the global semiconductor race for years to come.

Conclusion

In a world, where geopolitical fault lines are redrawn through supply chains and technology, Europe has begun the long journey toward strategic autonomy. But this path is riddled with challenges: fragmented alliances, soaring costs, and a status quo no longer anchored by stable norms. Where the Biden era gave Europe a sense of common direction, Trump’s return signals renewed volatility. With so many uncertainties ahead, it seems like Europe can only rely on itself to navigate these challenges.

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ABOUT THE AUTHOR

Rifat Šestić is a researcher specialising in the political economy and geopolitics of China, with a particular focus on semiconductors, China’s relations with the Middle East, and the broader international order. He holds a Bachelor's degree in International Studies, specialising in Middle Eastern studies, from Leiden University, and a Master's degree in Transnational Governance, with a specialisation in International Political Economy and Regulation, from the European University Institute. As a Research Assistant at the Policy Center for the New South, he examined China's Belt and Road Initiative in comparison to the European Neighbourhood Policy, contributing to analyses on global governance and regional economic strategies.

This article was edited by Daria Bogolyubova and Robin Millet.