BERLIN, 16 July 2025 — German Chancellor Friedrich Merz last week faced an unprecedented political setback, becoming the first German Chancellor in over 75 years to lose the initial primary round of the Bundestag vote. While Merz narrowly secured victory in the second round, his unexpected initial defeat underscores a deepening, multifaceted crisis spanning far beyond Germany’s borders: across Europe, the pervasive impacts of deindustrialization, economic stagnation, and the perceived collapse of traditional liberal political solutions are increasingly pushing voters toward the far-right. The consequences of this shift could be catastrophic—not just for the future of democratic governance, but for the very economic survival of the continent.
Europe’s established leaders now face a stark choice. To genuinely renew their economies and restore faith in democratic institutions, they must pursue bold new partnerships that are less reliant on traditional alliances. Increasingly, this imperative means looking beyond the United States.
Data from Germany’s Federal Employment Agency (BA), released March 31, 2025, confirmed that Germany, Europe’s largest economy, experienced a significant loss of 120,000 manufacturing jobs in 2024 alone, with the crucial automotive sector being among the hardest hit. Similarly, the United Kingdom’s Office for National Statistics reported in February 2025 that annual production output fell by 1.7% in 2024, with manufacturing contributing significantly to the decline. Meanwhile, populist forces across Europe, while gaining traction due to these economic grievances, largely offer no viable economic strategies, instead focusing on polarizing culture wars and scapegoating. As analysts increasingly observe, banning Pride flags or blaming immigrants will not bring factories back or balance national budgets.
Trump’s Return Shatters Transatlantic Stability
Compounding Europe’s internal economic and political vulnerabilities is the tumultuous return of Donald Trump to the global stage as U.S. President. Trump’s second term has demonstrably shattered whatever stability remained in transatlantic trade relations. His increasingly belligerent rhetoric toward European allies, erratic tariff policies, and relentless attacks on NATO partners are driving a profound wedge through decades of cooperation. Trump has made his worldview clear: in his perception, Europe is a burden to the United States, not a reciprocal partner.
Since his re-election, the Trump administration has escalated its protectionist trade measures. On April 2, 2025, Trump’s “Liberation Day” marked the introduction of universal 10% tariffs on imports from all countries not subject to other sanctions, followed by additional, often arbitrary, tariffs on specific trading partners. While some of these measures were temporarily paused, the White House confirmed on July 14, 2025, that EU trade ministers were planning countermeasures to Trump’s proposed 30% tariffs on the European Union, deemed “absolutely unacceptable.” This aggressive stance, widely criticized by economists, views trade deficits as inherently harmful and aims to promote domestic manufacturing, a policy direction extensively analyzed in reports on Tariffs in the second Trump administration. European public opinion has reacted sharply, with a YouGov survey (March 2025) indicating that 69% of publics in seven major European countries support retaliatory tariffs against the United States, as detailed by Global Affairs.org.
The United Kingdom, under Prime Minister Keir Starmer, has found itself directly caught in Trump’s transactional approach. Starmer’s government has scrambled to secure a trade deal with the U.S., reportedly signed at the G7 summit in mid-June 2025. While Starmer hailed it as an “historic Economic Prosperity Deal” cutting tariffs on cars and aerospace, the agreement remains complex, with details of quotas and ongoing negotiations for steel and aluminum tariffs, as reported by GOV.UK and Sky News. Many critics argue the deal, reached under duress of Trump’s broader tariff threats, offers flimsy real benefit compared to existing EU trade relationships. Starmer’s perceived ambition to maintain strong ties with both Washington and Brussels appears increasingly untenable under the weight of Trump’s assertive “America First” agenda. This delicate balancing act is a recurrent theme in our EU Politics coverage, particularly concerning shifts in global alliances.
Europe’s Imperative: Forging New Global Partnerships
Europe must now face the stark reality that Trump’s economic policies and his administration’s perceived disinterest in traditional alliances are not merely personal whims—they reflect fundamental shifts in America’s long-term priorities. Rather than continuing to appeal for U.S. support or a return to a bygone transatlantic consensus, the European Union must urgently strengthen its strategic ties with emerging powers in Asia, the Middle East, and Africa. These regions are increasingly charting the future of global energy, defense, and sustainable growth, offering diversified pathways to prosperity and security for Europe.
Some key European players are already taking decisive steps in this direction, forging impactful new alliances:
- Rolls-Royce: The British engineering giant has spent years meticulously nurturing defense and technology contracts with Gulf states. In a significant move on December 4, 2024, Rolls-Royce secured a £1 billion investment from Qatar to develop next-generation climate solutions and establish world-leading climate technology hubs in both the UK and Qatar, as confirmed by GOV.UK. This demonstrates a strategic alignment on green technology and investment.
- Covestro: Germany’s chemical innovator, Covestro, once on the brink of significant financial distress, was effectively revitalized by an €11.7 billion acquisition by Abu Dhabi’s national oil company, ADNOC. The acquisition, which received unconditional EU approval in May 2025, marks a strategic pivot for ADNOC into diversified petrochemicals and is explicitly linked to supporting Covestro’s ambitious climate and sustainability goals, including achieving climate neutrality for its Scope 1 and Scope 2 emissions by 2035, as reported by ChemAnalyst. ADNOC itself has committed $15 billion to low-carbon solutions by 2030, including carbon capture and renewables, and aims for Net Zero by 2045, as highlighted on ADNOC’s official website.
ADNOC’s investment is not merely financial; it is part of a broader, ambitious climate agenda that, ironically, appears more proactive and extensive in its scope than some initiatives seen from the United States. These are the kinds of diversified, future-oriented partnerships Europe must now embrace—not as acts of desperation to compensate for dwindling transatlantic ties, but as strategic moves toward a more self-sufficient, resilient, and diversified global future. This pivot aligns with broader discussions on Europe’s digital crossroads, emphasizing the need for strategic autonomy in critical sectors.
Charting a New Path to Prosperity
Rather than clinging to a broken alliance, Europe has a compelling opportunity to build new ones—grounded in mutual benefit, shared innovation, and 21st-century values. If President Trump insists on retreating into economic nationalism and prioritizing transactional relationships, Europe, meanwhile, possesses the collective economic power and diplomatic weight to surge ahead. This can be achieved by aligning with the fastest-growing markets and the most visionary global players. With or without America’s traditional leadership, the path to prosperity and enhanced security for Europe is still wide open.
This strategic reorientation, driven by necessity, also has significant implications for Europe’s long-term defense posture. As seen in initiatives like the Anglo-French nuclear defense initiative and Germany’s increasingly assertive role in European defense, the continent is proactively strengthening its own capabilities. The ongoing challenges of deindustrialization and economic transformation are forcing European leaders to fundamentally rethink their economic models, as evidenced by efforts to mitigate a demographic crisis and ensure social cohesion.
As Europe builds this diversified, self-reliant future, demonstrating the viability of democratic models that prioritize sustainable growth and global cooperation, Trump may one day find himself contemplating the shifting global balance of power—perhaps pondering the long-term cost of isolating the world’s wealthiest bloc of democracies.