Europe's Vanishing Act: How the EU Became the Main Course in a Geopolitical Feast

Europe's Vanishing Act: How the EU Became the Main Course in a Geopolitical Feast

As the US and China race toward technological dominance, Europe is discovering a brutal truth: It's no longer sitting at the table—it's on the menu.

BERLIN — When German Chancellor Friedrich Merz stood before assembled business leaders and policymakers this week to launch his government's High-Tech Agenda, his language carried an unfamiliar edge of alarm. "We must not let the US and China alone decide on technologies of the future," he declared, framing technological sovereignty not as aspiration but survival—tied directly to "prosperity, security, and freedom."

It was a remarkable admission from the leader of Europe's largest economy: that the continent has become a prize to be carved up rather than a power shaping its own destiny.

The evidence suggests Merz isn't being hyperbolic. Across multiple fronts—from rare-earth minerals to electric vehicles, from artificial intelligence infrastructure to advanced semiconductors—Europe is being squeezed in a tightening vise. China is moving up the value chain with startling speed, flooding European markets with sophisticated manufacturing. The United States has pulled so far ahead in digital platforms and AI compute that European dependence has become a strategic vulnerability. And in the past few months, that squeeze has intensified dramatically.

The Tightening Noose

This autumn alone has delivered a cascade of pressure points that expose Europe's predicament:

In September, China tightened export controls on rare-earth elements—the critical materials that power everything from electric vehicle motors to semiconductor manufacturing. European stockpiles are running low, and Brussels has threatened retaliation while scrambling to secure alternative supplies. It's exactly the kind of chokepoint Europe's industrial strategy was designed to avoid, now weaponized in real-time.

The electric vehicle sector, once a beacon of European industrial ambition, has become a battleground. Despite EU anti-subsidy tariffs imposed over a year ago on Chinese EVs, analysts report they're unlikely to block profitable Chinese exports. BYD and other manufacturers are already preparing to absorb the costs while maintaining competitive pricing. Beijing, meanwhile, has retaliated with targeted strikes against cognac, pork, and dairy—sectors with deep political constituencies in France and Northern Europe. Multiple Chinese automakers have also challenged the tariffs in EU courts, tying up Brussels in legal warfare while their vehicles continue arriving at European ports.

Fresh analysis from the European Central Bank, published just weeks ago, documents rising Chinese import penetration in high-value sectors including vehicles and specialized machinery. The research goes further, linking this flood of imports to measurably weaker employment outcomes in affected European regions. The threat is no longer hypothetical—it's showing up in factory closure announcements and unemployment statistics.

Meanwhile, the transatlantic gap in AI and computing infrastructure has widened into a chasm. The United States is experiencing a record year for hyperscaler capital expenditure and data center construction in 2025, with investments and power capacity additions that dwarf European efforts by an order of magnitude. Each new megawatt of US compute capacity further entrenches American dominance in the artificial intelligence platforms that will define the next generation of economic activity.

Losing Ground on All Fronts

The numbers tell a stark story of erosion. Between 2013 and 2023, Europe's share of global technology revenues fell from 22% to 18%, while the US share climbed from 30% to 38%. In sophisticated manufacturing, empirical trade data shows China gaining EU import share across most advanced product categories since 2000, with Germany's share falling notably between 2020 and 2022—precisely when China's industrial upgrading strategies hit their stride.

Research output indicators paint an equally concerning picture. China now leads or stands as a near-peer in numerous critical technology domains, with multiple independent trackers documenting Chinese dominance in cutting-edge research areas that will determine future industrial competitiveness. The manufacturing muscle is following the research leadership.

Europe, caught between these two forces, faces a unique form of strategic compression. The continent remains deeply dependent on US software, platforms, and digital infrastructure—a vulnerability Merz and other European leaders now openly characterize as a sovereignty risk. At the same time, China's cost advantages and manufacturing scale in clean technology and advanced industrial goods threaten to hollow out European production capacity in sectors the continent still considers strategic.

"Europe is still far too dependent on US software and must build its own data centers and capabilities to regain digital autonomy," Merz warned at the High-Tech Agenda launch, a statement that would have seemed alarmist just five years ago but now reflects mainstream European elite opinion.

Policy Responses: Too Little, Too Late?

To their credit, European policymakers have recognized the threat and mobilized responses. The Draghi competitiveness blueprint, the Commission's Clean Industrial Deal unveiled in February 2025, and national initiatives like Germany's newly launched High-Tech Agenda all aim for a step-change in innovation scale, permitting speed, and single-market integration.

Merz's agenda targets climate-neutral energy including a major fusion power push, advanced AI, quantum computing, biotechnology, microelectronics, and domestic battery and hydrogen value chains. He's pledged to deliver a Fusion Action Plan by year's end and has declared building the world's first viable fusion reactor a national priority. The Commission, for its part, has mobilized major loan guarantees, state aid flexibility, and trade defense tools while pushing "AI Factories" through its EuroHPC initiative.

The problem is execution speed. One-year progress reviews of the Draghi blueprint consistently identify implementation pace as the binding constraint. European decision-making remains slow and fragmented across 27 member states, while competitors move with singular national purpose backed by massive capital deployment. State aid rules have been relaxed, but actually flowing capital to scale-up companies and building physical infrastructure takes years that Europe may not have.

Business groups have been blunt in their assessments, warning of a "fragile EU economy with shrinking global output share and regulatory drag," arguing that without faster, more predictable decisions, the competitive slide will become structural and irreversible.

A Question of Will

The technical and financial resources exist. Europe retains world-class research institutions, a deep engineering talent base, and significant capital markets. What's unclear is whether the political system can move fast enough to translate those assets into scaled companies, domestic supply chains, and sovereign technological capabilities before dependencies become permanently entrenched.

The metaphor that Europe is "on the menu" rather than at the table captures a fundamental power shift. In technology, in manufacturing, in the control of critical supply chains, European actors increasingly respond to decisions made in Washington and Beijing rather than shaping those decisions themselves. The rare-earth controls, the EV trade war, the AI infrastructure arms race—in each case, Europe is reacting to moves by others, deploying defensive measures against forces already in motion.

Merz framed the challenge in existential terms this week: a "systemic conflict between liberal and authoritarian states" where technological sovereignty determines whether Europe retains the capacity for independent action or becomes a market to be managed by others.

The coming months will test whether Europe's competitiveness agendas represent a genuine turning point or merely eloquent descriptions of decline. The ingredients for a response exist. The question is whether they can be assembled with the speed and scale required—before the main course is fully served.

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