Three shocks that shook the world in 2025.

This was the year in which the remaining pillars of the late 20th century order were shattered. The hollow core of what was considered the global system was exposed. Three blows were enough.

The first is the impending Russian victory in Ukraine over the unified European leadership. For almost four years, the European Union and NATO have been playing a dangerous double game. On the one hand, they have been rhetorically committed to a Ukrainian victory, which they were not prepared to financially support. On the other hand, they have used this endless war to advance a new political and economic internal consensus: military Keynesianism was to be their last desperate attempt against the deindustrialization of Europe.

On a continent where crippling political constraints prohibited significant green investment or deficit-financed social policies, the war in Ukraine provided a powerful justification for diverting public debt to the defense-industrial complex. The unspoken truth was that the endless war served a crucial function: it was the perfect engine for a Keynesian “pump-and-dump” of Europe’s ailing economy.

This contradiction proved fatal: if the war in Ukraine had ended with a peace agreement, it would have been difficult to sustain this economic stimulus program. And achieving a victory that would justify the spending was considered too costly financially and too risky geostrategically. So Europe opted for the worst possible strategy: sending Ukraine just enough equipment to prolong the bleeding, without changing the course of the war.

Now that Russia is expected to prevail (a predictable outcome that US President Donald Trump has only accelerated), the EU’s best-laid plans lie in ruins. Europe has no “Plan B” for peace, as its entire strategic position has become dependent on the continuation of the war. Whatever dirty peace deal the Kremlin and Trump’s men eventually impose on Ukraine will do more than simply redraw borders. Whether Russia remains a threat to Europe or not, Europe is on the verge of losing the excuse for its fledgling military-industrial boom, heralding a new era of austerity.

The second blow was that China won a trade war with the United States. The American strategy, begun during Trump’s first administration and intensified under Joe Biden, was a “pincer maneuver,” a two-pronged pressure: tariff barriers to limit China’s access to markets and an embargo on advanced semiconductors and the tools to manufacture them to slow its technological rise. In 2025, this strategy experienced its Waterloo, and Europe was once again the primary collateral damage.

China responded with a masterstroke in two parts. First, it instrumentalized its dominance of rare earth elements and key minerals, causing a supply chain crunch that paralyzed not so much American as European and East Asian green industries. Second, and most devastatingly for America’s position as a global technology leader, China mobilized its “whole nation system” toward a single goal: technological autarky. The result was a stunning acceleration of domestic chip production, with SMIC and Huawei making breakthroughs that rendered the Western embargo led by the United States not only obsolete but counterproductive.

This is probably the shock that will have the most lasting consequences. In 2025, the US proved incapable of slowing China’s rise and, instead, unwittingly pushed its technology sector towards full independence. And Europe, which dutifully imposed sanctions on China dictated by the White House, is left with the worst of all possible outcomes: increasingly excluded from the lucrative Chinese market for its high-value-added goods, while without any access to the generous subsidies and benefits of repatriating production offered by the now-retired US Inflation Reduction Act. By choosing to act as a strategic subcontractor to the United States, the European Union has accelerated its own deindustrialization. This was not a defeat in a trade war – it was a geopolitical checkmate, in which Europe emerged as a pawn on the losing side.

The third shock was the ease with which Trump won his tariff war against the European Union. At the end of a meeting at one of Trump’s golf clubs in Scotland, which his people had orchestrated to maximize her humiliation, Ursula von der Leyen, the president of the European Commission, could barely manage to present the capitulation document as a “historic agreement.” Tariffs on European exports to the United States jumped from about 1,2% to 15%, and in some cases to 25% and 50%. The EU’s long-standing tariffs on American exports were eliminated. And, last but not least, the Commission committed to $600 billion in European investment in American industry on U.S. soil—money that could only come by redirecting, primarily German investment, to chemical plants in Texas and car plants in Ohio.

It was more than a bad deal. It was an unprecedented precedent—a capital-extraction deal. It formalized the EU’s transition from industrial competitor to subordinate. Europe was destined to play the role of a source of capital, a regulated market for American goods, and a technologically dependent junior partner. To add insult to injury, this new reality was codified in a binding arrangement that all 27 EU member states have now agreed to, stripping the Union of any semblance of sovereignty. Some of the capital that Trump needs to solidify his vision of a G2 world structured around a Washington-Beijing axis is now contractually obligated to flow from Europe to the West.

These three shocks form a synergistic trilogy. Europe’s defeat in Ukraine exposed its strategic blind spots and cracked the project of military Keynesianism. Trump’s appeasement of Chinese President Xi Jinping unleashed a flood of Chinese exports to the EU. The “racketeering” in Scotland cost Europe its accumulated capital and any remaining hope for equality.

In the world of G2, the imagined global village has become a gladiatorial arena in which the European Union and the United Kingdom now roam aimlessly. A new, harder, colder world order has been erected on the grave of European ambition. The lasting lesson of this year is this: in a time of existential struggle, strategic dependence is a prelude to insignificance.

The author is a Greek economist; he is the leader of the MERA25 party and a professor of economics at the University of Athens.

Copyright: Project Syndicate, 2025. (translation: NR)