CBS Professor: "The trade war could be a win for Europe – if we are willing to invest in ourselves”

Europe is at a crossroads. For decades, Europe has been deeply integrated into a globalised economy, benefiting from American defence and Chinese production.

But now global powers like USA and China are retreating behind tariffs and national security interests, and the old world order is beginning to unravel.

China and the United States are locked in a trade war, while American credibility as Europe’s military ally has significantly declined – most recently fuelled by signs of US interest in Greenland, which leaves Europe unable to defend or supply itself. We might be tempted to conclude that the future looks bleak.

In the middle of this geopolitical turmoil, Poul Fritz Kjær, Professor of Governance and Sociology of Law at Copenhagen Business School, sees the outlines of a new beginning:

“It may sound like a paradox, but this trade war could actually turn out to be a win for Europe – if we dare to think long term and invest in our own capacities.”

Businesses are caught between nations

It is not just states feeling the pressure. Companies, too, are facing a new reality, where being multinational and trying to keep all doors open is no longer acceptable.

Multinational giants like Coca-Cola, Novo Nordisk or Microsoft often present themselves as global players. But in practice, they remain deeply rooted in one country – culturally, legally and politically. And increasingly, they are being forced to pick sides.

“Most companies know very well that they are not truly multinational. They may, for instance, be very American or very German.  But they try to appear global – because that has made it easier to sell their products. That is becoming more difficult now.”

Talking about jobs and investments across borders is no longer enough.

“There is still a strong desire to do the kind of splits that worked in the past – where companies could claim to be American, Danish and Japanese all at once – but that approach is under increasing pressure.”

Regulation matters more than boycotts

However, Poul Fritz Kjær does not believe it makes much of a difference when consumers pick Danish Jolly Cola over American Coca-Cola.

“Consumer boycotts do not have a lasting impact. Historically, they tend to fade, but regulation and legislation have a real effect.”

The so-called cola war is just a symptom of something much bigger: Globalisation has become fragmented.

While the 1990s and 2000s were defined by free trade and technological integration, we now live in a time where states – and the EU in particular – are actively regulating to ensure that data, communications, energy sources and, to some extent, supply chains remain within their own borders.

“We are seeing states, and especially the EU, beginning to legislate that, for example, communication and software must be European to safeguard democracy and cybersecurity.”

Here, Poul Fritz Kjær points to examples like Starlink, TikTok and Microsoft – actors that must either comply with European regulation or risk exclusion from public and strategic markets.

Microsoft has tried to respond to these concerns by setting up data centres in the EU and promising data sovereignty.  But the question is whether it is enough?

“They are doing their best. But if Washington issues a direct order, we know what will happen. They will follow it.”

From dependence to scaling up

Even though USA and China are ahead of Europe in several technological areas, Poul Fritz Kjær argues that Europe is not forced to rely on American or Chinese technology.

Across sectors – from software and search engines to satellites – European alternatives already exist.  They are just much smaller.

“It is not a question of whether alternatives exist. They do. But we need to scale them from covering 3% of the market to 90%. That could happen within five to ten years, but it requires investment and clear political commitment.”

The same applies to the defence industry. Today, European countries buy up to 75% of their military equipment from USA. That creates dependence and vulnerability.

According to Poul Fritz Kjær, Europe has the capacity to produce on its own but lacks volume and coordination.

“You cannot develop a new fighter jet if European governments will not commit to buy it. It takes long-term commitment – not just technologically but politically as well.”

Can we live without American technology and software?

Historically, fractures in trade relations between major nations, like those we are seeing now, are nothing new.

Before the First World War, Britain and Germany were each other’s biggest trading partners. That relationship disappeared almost overnight when the war began. Similarly, Russia and Ukraine were economically intertwined before 2022 – a connection that has now been severed.

“You might say: ‘we cannot live without American software’. But Britain and Germany also thought they could not live without each other in 1914. That changed the moment they were forced to.”

This is a key point in Poul Fritz Kjær’s analysis: the world can change far more quickly than we imagine. Europe must be ready – not to isolate itself, but to act strategically.

“This is not about boycotting anyone. It is about avoiding being 100% dependent on anyone. It is an insurance policy.”

An opportunity, but no guarantee

So what will it take for Europe to no longer depend on American military and technology?

“Above all, we must stop hoping everything will go back to the way it was. Even if Trump is out of the picture, our relationship with USA will never be the same. Once a marriage has gone through a messy divorce, you might move back in together – but it will never be quite like before.”

According to Poul Fritz Kjær, the key is to understand that the world has changed fundamentally and that Europe will only come out stronger if we dare to build new structures and invest in our own capacities. Not for ideological reasons, but because we have to.

“We have a unique opportunity. But we have to choose to take it. And we must be willing to pay the price up front – politically and economically. It is a classic question of acting before it is too late.”