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This newsletter concludes a year marked by disorientation in Europe. The United States' dramatic ideological shift has had a tangible impact on at least three levels: the relationship with Russia and support for Ukraine, the high degree of trade uncertainty, and deregulation in the digital and green sectors. Some of these issues are addressed in the latest EconPol publications. But before reviewing them, let us briefly take a look back at the year that is coming to an end. Wishing you all a pleasant read, I would like to send you EconPol’s best wishes for a happy Christmas time and a great start to 2026!

A Look Back at 2025: US Paradigm Shift Donald Trump took office as the 47th president of the United States on January 20. Less than a month later, on February 14, Vice President J.D. Vance delivered a speech at the Munich Security Conference. His accusations of censorship and restrictions on freedom of speech by European governments and institutions seemed to foreshadow Elon Musk's fierce posts on X in recent days, following the European Commission's December 5 decision to fine X for violating the transparency obligations of the Digital Services Act.

April 2, or “Liberation Day,” was arguably the most momentous date of the year. It marked the beginning of a period of trade uncertainty that continues today. But trade and free speech are not the only areas where the new administration has openly attacked Europe. In his September 23 speech at the UN General Assembly, Trump called the green transition “a scam” and criticized migration policies. These points are also mentioned in the 2025 National Security Strategy, published a few days ago on December 4. The document evokes the “stark prospect of civilizational erasure” and states that Europe must “abandon its failed focus on regulatory suffocation.” Amid this unprecedented US pressure, Europe is facing growing provocations from Russia and remains dependent on China for technology and commerce. Will 2026 be the decisive year for European sovereignty? Time will tell.

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The Distribution of Profit Shifting On June 28, 2025, the G7 meeting in Canada issued a statement effectively exempting US companies from the so-called Global Minimum Tax (GMT) – a 15 percent levy on the profits of large multinational enterprises (MNEs) – in favor of a “side-by-side” solution. Although the compromise was welcomed by all parties and the OECD, this Policy Brief, published in October, concludes that it risks undermining global efforts to fight profit shifting.

The Economic Consequences of Tariffs and Trade Policy Uncertainty The direct impact of tariffs has been widely discussed. Quantifying the toll of trade uncertainty on the European economy is more challenging yet equally crucial. The authors of our latest Policy Brief asked a pool of economists to provide estimates in the Q2 and Q3 2025 Economic Experts Survey. On average, the respondents anticipate a cost of uncertainty on economic growth of 0.59 percentage points and a decline in firm investment of 4.7 percent over the next five years. Restoring predictability in global trade is key to the bloc's economic prosperity. Although much will depend on US trade policy, the EU has some trump cards to play. Future EconPol publications will explore their potential.

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EconPol Forum 04/2025: Governing Social Media – Societal Challenges and Policy Pathways As mentioned above, the EU recently fined X and accused other digital platforms, including Meta and TikTok, of breaching obligations under the Digital Services Act. While cutting red tape remains vital to boost Europe’s competitiveness, this new issue of EconPol Forum explains why social media still demands careful regulation. Our contributors examine how social media affects news consumption, political accountability, scientific communication, democratic debate, and mental health. They also discuss current policy tools and offer recommendations for more effective and less distortive digital governance.

Policy Debate of the Hour Introduction Social Media and Traditional Media Frictions in News Consumption: How to Improve the Social Media News Diet Combating Misinformation: What Works and What We Should Do Mobile Broadband Accountability, Populism, and Misinformation Speaking Science in the Digital Age: How Political Expression on Social Media Shapes Trust in Experts Homophily, Social Capital, and Social Trust Social Media and Protests: An Opportunity to Strengthen Democracy Online Hate Speech, Offline Harm, and the Case for Content Moderation Beyond Takedowns: How Moderation Shapes What Gets Created Partisan Conflict on Social Media: Empirical Evidence and Policy Challenges Toxic Content and Engagement Social Media and Mental Health: The Role of Algorithms and Regulation

Economic Policy and its Impact Serving the Region? The Role of the Defense Sector in Europe’s Regional Development Investments in defense present opportunities for regional industrial development and economic growth, as well as for strengthening European cooperation. However, policymakers must carefully assess their actual impact and consider the risks of “picking winners”, such as excessive sector dependence and “defense washing.”

Institutions Across the World Organized Labor Versus Robots? Co-Determination in Times of Automation Even before the advent of AI, automation significantly impacted routine jobs. But what role can labor institutions play amid shifts to automation? This article addresses this question by examining how Germany’s works councils can benefit both incumbent workers and firms.

Big Data-Based Economic Insights Who Drives Green Tech? Patenting Trends of Top R&D Firms Innovation is critical for achieving climate neutrality. Top global R&D companies are key players, generating more than one-third of green patents on average between 2012 and 2019. However, such patents are in steady decline, as this study highlights. To thrive, (green) innovation needs clear regulations.

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Opinion: What does the new US National Security Strategy mean for Europe?   As noted, the new US National Security Strategy does not spare Europe from vehement criticism. However, facts – such as the decline in the EU's share of global GDP – and well-founded criticism – such as that of an overly complex regulatory framework – should not be dismissed too quickly. In an upcoming Opinion piece, ifo director Clemens Fuest calls on the EU to focus on its core tasks in order to preserve its unity and counter the US administration's attempts to “divide and rule.”

EconPol Forum 01/2026: Paving the Way for Tech Disruption – How to Rethink EU Industrial Policy   Industrial policy is making a comeback. From AI to advanced manufacturing, nations are revising their strategies to secure a competitive technological edge. Europe faces a clear task: designing an industrial policy that ensures technological sovereignty while enabling the continent to deter, defend, and compete in an era of uncertainty. Is the EU doomed to chase the US and China, or can it lay the foundations for the next wave of disruptive innovations? How can it harness emerging technologies without distorting competition? Which sectors should be prioritized, and which policy instruments are best suited to the task? The 01/2026 issue of EconPol Forum, coming out on January 29, 2026, will address these questions, discussing how Europe can unlock the potential of its innovation ecosystem by designing effective industrial policy.

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