In early January, Pope Leon XIV addressed the ambassadors accredited to the Holy See. His speech referenced The City of God, the great work of Saint Augustine (354–430 CE). In August 410, Rome was set ablaze by Alaric’s forces, traumatising its inhabitants. The Bishop of Hippo urged them to lift their eyes from the earthly city to the heavenly one, “invisible yet enduring, founded on justice and peace”. Faced with today’s “change of era”, marked by power politics, violated borders, and the return of war (the earthly city), the Pope called for the defence of multilateralism and the international order enshrined in the UN Charter (the heavenly one).
This defence is indeed necessary and may yet prevail. But in the meantime, we citizens of the earthly city, in the early decades of the 21st century, have no choice but to adapt. As the geopolitical and geo‑economic landscape shifts and uncertainty rises, risk reduction (derisking) becomes essential. The retreat of international cooperation and the intensifying competition, even rivalry, among global regions create discomfort for governments and businesses alike. Establishing new anchor points is difficult, and today’s disorder can easily entice actors down paths that prove to be dead ends. Prudence is therefore essential.
Europe embarked on this path several years ago. As early as 2023, European Commission President Ursula von der Leyen emphasised the need to reduce risks in relations with China. This did not mean distancing Europe from China – such a step would be neither viable nor aligned with the EU’s interests – but acknowledging the profound shifts underway in Beijing. The era of reform and openness has given way to one focused on security and control. Two statements by President Xi illustrate this:
- building China’s army into a “Great Wall of steel” protecting sovereignty, security, and development;
- increasing foreign dependence on Chinese industrial supply chains to create a powerful deterrent capacity.
European derisking vis‑à‑vis China therefore takes four main forms:
- strengthening Europe’s economic and industrial resilience and competitiveness, particularly in health, digital technology, and clean tech;
- deploying tools to counter economic distortions (including the new anti‑coercion instrument);
- ensuring European investment and know‑how are not used outside Europe for military or intelligence purposes without intergovernmental agreement;
- deepening partnerships with other countries, particularly within the G7 and G20.
Today, however, risk reduction must expand to include the United States. The Trump administration has implemented, or threatened to implement, a series of economic and political measures that weaken Europe’s position: tariffs, digital regulation, moves concerning Greenland, and open support for far‑right parties within EU member states. European public opinion has formed a clear view: according to a Grand Continent survey from January 2026, some 51% consider the US President an adversary of Europe. The perceived threat level stands at 5.4 out of 10, compared with 4.3 for President Xi and 6.9 for President Putin. A strong majority (73%) believe Europe must rely primarily on itself for its defence. However, this distancing from the United States does not imply a rapprochement with China: nearly three‑quarters reject alignment with either superpower.
The economic stakes are vast. In 2024, Europe’s bilateral trade in goods and services with China and the United States reached €2.5 trillion, equivalent to roughly 14% of EU GDP. Around €800 billion was with China and €1.7 trillion with the United States. But Europe’s trade balance with China is sharply negative (roughly one‑third of the total), while the balance with the US is slightly positive (around 3%). Firmness vis‑à‑vis China is understandable; the American “slights”, as many in Europe perceive them, much less so. Responding simultaneously to the non‑cooperative stances of both countries is profoundly uncomfortable. The behaviour of the Trump administration is perceived as both unfair and value‑destroying. Yet moving closer to China does not appear prudent, unless one expects Beijing to change course on its external economic strategy, which seems highly unlikely.
On 20 January, at the World Economic Forum in Davos, Canadian Prime Minister Mark Carney proposed a roadmap for middle powers in a world where China and the United States practise mercantilism – expansive export‑driven mercantilism in China’s case; defensive, import‑reducing mercantilism in America’s. Although Canada’s GDP is nine times smaller than the EU’s and its population eleven times smaller, Europe’s limited geopolitical traction often places it in a similar category. Since these middle powers (in Europe, North America, and Asia‑Pacific) have much to lose in a world of walled‑off superpowers, their strategy is to multiply cooperative agreements among themselves. Many have already begun.
But is this enough to achieve derisking? It is necessary, but not sufficient. What should be done with the vast capital holdings in countries with which Europe now seeks to loosen ties? EU member states have invested roughly $8 trillion in the US in equities and bonds. Rapid, large‑scale divestment would risk significant losses, as the dollar’s current weakness against the euro demonstrates.
Moreover, successful economic and financial diversification has a political dimension: ensuring that an open‑world logic survives, even if the terms of openness must be revised. How can we maintain the global architecture – the ecosystem of international organisations – required for smooth global exchange, in spite of American obstruction on one side and Chinese influence on the other? And how can we organise and finance the military capabilities needed to safeguard the free circulation of goods and people across most of the globe? France’s General de Gaulle once observed, with clarity and ambition: “Because we are no longer a great power, we must have a great policy. For if we do not have a great policy, since we are no longer a great power, we shall be nothing.”
Can the EU devise and sustain such a “great policy”, without which it cannot aspire to “great‑power" status? The answer is far from obvious. After the Second World War, transcending nation‑states and compelling them to cooperate at a limited supranational level made sense to prevent future conflict. Open borders within Europe supported economic catch‑up, and the Soviet threat encouraged shared positions on foreign and defence policy. During the “neoliberal moment” from roughly the 1990s to 2010, the consensual belief that global markets required common rules supported deeper integration: single market competition rules, trade liberalisation.
Throughout these phases, European countries shared initiatives fostering collective success without losing their national identities. But is incremental, delicate integration still possible when facing two superpowers seeking to build spheres of influence and bind others into subordinate roles? If vassalisation (particularly to the United States) must be rejected, and full integration (a common Treasury, foreign policy, military force, and major fiscal transfers) remains out of reach, then Europe’s position becomes difficult to articulate, and even harder to understand. Are we living in an age that no longer tolerates neutral stances?
Framed this way, Europe’s situation appears especially uncomfortable. But must China and the United States really be placed on the same level?
China’s strategy is clear. Its ambition is to climb the value chain while reducing reliance on imports. It must therefore tolerate, at least initially, overcapacity in key sectors, managing it primarily through large‑scale exports. For Europe, the implications are grim: more imports now, fewer exports later. The logic of derisking is self‑evident.
What of the United States? Can we step back from the mix of harsh rhetoric and inconsistent actions? US trade policy must be understood within a broader context: domestic frustration among the middle classes; China’s rise, which Washington unsurprisingly struggles to accept; and a shift from neoliberal regulation to a model that prioritises national interests and a more active state.
The neoliberal moment was also a unipolar one, with the United States as the uncontested global leader. In a world of broadly stable global balances, implementing shared rules made sense. It was never obvious that all countries benefited equally – some more than others. Yet it is even harder to sustain universal rules when competitive balances shift because one actor (namely, China) does not adhere to them.
From the White House’s perspective, the world as it is now cannot be managed by following rules conceived in a different era, nor can American interests be safeguarded. This argument, generally speaking, is not devoid of logic, though it is a bitter pill to swallow, particularly in the light of White House’s singular approach to communication.
The world is changing. China seeks to seize the moment. The United States rejects outdated rules and shields itself, often unfairly and aggressively, from adverse consequences. China’s challenge is structural; America’s is one of posture and execution. Should derisking be applied identically to both? Perhaps not.
Hervé Goulletquer, conseiller économique principal, Accuracy