Kateryna KrasinaThis article is based on a lecture by Gabriel Felbermayr, Director of the Austrian Institute of Economic Research (WIFO), and reflects the conceptual changes in how European analysts perceive the principles and prospects of the global economic model. The conclusions are significant for Ukraine in understanding global and regional trends and in planning its integration into the European economic and industrial system.
Key Takeaways
- The global economy has shifted from a “win-win” model to one of competition. Its development is now defined by the confrontation between the US and China.
- It is now evident that countries must strengthen their industrial capacities — “If you don’t have steel, you don’t have a country.”
- In this regard, Europe must reduce its dependence on both the U.S. and China.
The End of the “Win-Win” Era
The early 2000s were considered a period of mutually beneficial economic relations, marked by trade liberalization, tariff reductions, and the creation of global value chains. When China joined the WTO in 2001, it seemed that China’s industrial growth benefited everyone — through market access and cheaper goods.
However, two decades later, the global landscape has changed. Although living standards have generally improved, China’s integration into the global market led to its rapid rise and an imbalance of power. Integration has been replaced by competition. China’s industrial dominance is now viewed not only economically but strategically — as a potential threat.
Industrial Capacity as a Tool of Power
One of the central ideas of the lecture is that industrial capacity is a strategic asset. Those who possess it have greater leverage in political conflicts. Felbermayr cited Donald Trump’s words: “If you don’t have steel, you don’t have a country.” Though they may sound populist, they hold truth today — industry is part of national security and a pillar of sovereignty.
Industrial policy has always been an instrument of rivalry, as seen during modernization eras. Today it remains vital: industrial performance affects the entire economic system, including the energy and customs sectors. The strength of the steel industry, in particular, is an indicator of a nation’s defense readiness.
Europe’s Role amid US-China Rivalry
The confrontation between the US and China goes far beyond a so-called trade war. It is a competition for industrial and technological dominance — both seen as political and security assets.
US trade measures, including tariffs, are costly economically but strategically motivated. For China, they are harmful but not enough to alter its economic trajectory. The EU, caught between these two powers, faces dependency on both. Notably, the EU imports 2–3 times more from China than it exports, creating structural dependence. While the US can afford open confrontation with Beijing, such a scenario is far more economically risky for Europe.
Another challenge is the EU’s declining influence in the Global South. Countries that once relied on Europe for trade now increasingly cooperate with China.
Thus, Europe finds itself in an unfavorable position — unable to match the export capacities of the US or China and dependent on their rivalry.
A Balanced Trade Policy
The EU can no longer fully rely on the United States. European nations must strengthen self-sufficiency, which includes faster political decision-making, the ratification of agreements, and reinforcement of the internal market.
Europe must also be ready to consider employing tariffs and sanctions when necessary. At the same time, trade policy must become more efficient — improving coordination of customs measures and technology supply chains, and protecting vulnerable sectors to reduce external dependency.
Enhancing productivity within the EU is equally crucial. A key question remains whether Europe can act more decisively, swiftly, and boldly in this new environment.
Conclusions
The world economy and industrial system are undergoing profound transformation, directly affecting the ability of states to remain politically autonomous and safeguard their national interests and security.
China’s rise is no longer seen as peaceful but rather as a source of risk. The US tariff policy and intensifying competition with China pose another major challenge.
In these conditions, Europe must strengthen its economic and industrial capacity, develop more effective governance, and be ready to correct its tariffs and sanctions policy. Whether Europe retains its status as a geopolitical player in this new era of competition and conflict will depend on its political will and leadership.