The European Union is facing an unprecedented convergence of crises that threaten its security, economy, and ideological foundations, according to the Munich Security Report 2025. The annual report, released on Monday, warns that the shift towards a multipolar world is challenging the EU’s liberal vision—and that a second Donald Trump presidency could accelerate this trend.

The findings come just days before world leaders, ministers, and defense executives convene for the Munich Security Conference from February 14-16, where discussions will focus on the bloc’s response to these emerging threats.

Defense Concerns and NATO Pressures

The report highlights the impact of Russia’s war on Ukraine, stating that it has “destroyed Europe’s cooperative security architecture.” While European nations have ramped up defense spending, with many now meeting NATO’s 2% GDP target, the report warns that these increases are still insufficient.

Furthermore, Trump’s potential return to the White House is seen as a major concern. The former president has called for NATO members to increase spending to 5% of GDP—a target no ally currently meets. He has also suggested he would allow Russia to “do whatever the hell they want” to NATO countries that fail to contribute enough to their defense.

With an estimated €500 billion needed for European defense investment over the next decade, EU leaders are considering various funding mechanisms, including:

• Expanding the European Investment Bank’s mandate
• Relaxing Environmental, Social, and Governance (ESG) rules for banks to allow more investment in defense
• Issuing Eurobonds to raise capital
• Adjusting EU fiscal rules to exclude defense spending from national budget constraints

A White Paper on defense, detailing necessary military capabilities and potential funding solutions, is set to be released on March 19.

Economic Turmoil and Trade Challenges

The report also underscores growing economic uncertainty, warning that Trump’s return could worsen tensions between the EU and the US. Trump has threatened to impose new tariffs on the EU and announced a 25% tariff on steel and aluminum imports, which could significantly impact European exporters.

Additionally, the report warns that escalating US-China trade disputes could harm the EU, as China may flood the European market with heavily subsidized, low-cost exports in response to American tariffs. This situation, coupled with the deterioration of global institutions like the World Trade Organization (WTO), could force the EU to diversify its trade relationships—potentially requiring difficult concessions in negotiations with the Global South.

Political and Ideological Divisions

Beyond economic and security concerns, the report highlights the growing ideological divide within the EU. The rise of far-right parties, now in government in seven member states, is challenging the liberal democratic principles on which the bloc was founded. France and Germany, the EU’s two largest economies, are also witnessing a surge in support for nationalist parties, with the Rassemblement National and Alternative for Germany (AfD) gaining influence.

The report warns that these internal divisions could weaken EU unity and decision-making at a crucial moment in its history.

Key Leaders to Meet in Munich

The Munich Security Conference will see participation from top EU officials, including European Commission President Ursula von der Leyen, Defence Commissioner Andrius Kubilius, and EU foreign policy chief Kaja Kallas.

From the US, Vice President JD Vance and Ukraine-Russia envoy Keith Kellogg will attend, while Ukrainian President Volodymyr Zelenskyy is also expected to take part.

With Europe at a crossroads, the conference is set to be a defining moment for discussions on the bloc’s security, economic resilience, and geopolitical future.

China’s latest round of retaliatory tariffs on U.S. goods is set to take effect on Monday, February 10, as tensions between the world’s two largest economies continue to escalate. The move follows Washington’s decision to impose 10% tariffs on all Chinese imports, which came into force earlier this month.

In response, Beijing announced its countermeasures on February 4, just minutes after the new U.S. tariffs were implemented. The latest Chinese tariffs will see a 15% border tax on American coal and liquefied natural gas (LNG), while crude oil, agricultural machinery, and large-engine vehicles from the U.S. will face a 10% tariff.

Growing Economic Hostilities

The trade war, which began under U.S. President Donald Trump’s administration, has already strained relations between the two economic superpowers. However, the U.S. leader hinted at expanding trade penalties beyond China, suggesting a broader effort to reshape America’s global trade policies.

Speaking at the White House during a meeting with Japanese Prime Minister Shigeru Ishiba on Friday, Trump revealed that his administration was preparing new “reciprocal tariffs” on other trading partners.

“I’ll be announcing that next week—reciprocal trade—so that we’re treated evenly with other countries,” Trump said. He did not specify which nations would be affected but suggested the measures could address the U.S. budget deficit.

The president also reiterated his stance on European trade, criticizing the EU’s tariffs on American car imports, which he claims are unfairly high compared to U.S. duties on European vehicles. Trump previously warned that tariffs on EU goods could be imposed “pretty soon”, although he suggested the U.K. could be exempt if a trade deal is reached.

China’s Countermoves Beyond Tariffs

China has not only responded with import taxes but has also tightened economic pressure on American businesses. Last week, Chinese regulators launched an anti-monopoly investigation into U.S. tech giant Google, while PVH Corp.—the American company behind Calvin Klein and Tommy Hilfiger—was placed on Beijing’s “unreliable entity” list.

Adding to trade tensions, China also imposed export controls on 25 rare metals, crucial for manufacturing electronics and military equipment. The restrictions could significantly impact U.S. technology and defense industries, as China remains the world’s leading supplier of many of these key resources.

What’s Next?

As China’s new tariffs take effect, all eyes are on Washington to see whether Trump will follow through with his latest trade threats. If the U.S. imposes additional levies, the trade war could intensify, potentially affecting global markets and economic stability.

While both nations have expressed willingness to negotiate, no immediate resolution appears to be in sight, leaving businesses and investors bracing for further economic uncertainty.