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In a landmark advisory opinion, the International Court of Justice (ICJ) ruled on 23 July 2025 that all UN member states have legal obligations under international law to address climate change, which the court described as an existential threat to life on Earth. Powerful countries too must be held responsible for their current emissions and past inaction. Possibly in anticipation of such a ruling, Chris Wright, the US Secretary of Energy and former chief executive of Liberty Energy (an oilfield services company), published an article in The Economist a week earlier, arguing that “climate change is a by-product of progress, not an existential crisis”. Whereas the ICJ relied primarily on the IPCC reports, “which participants agree constitute the best available science on the causes, nature and consequences of climate change”, Wright’s view is based on a particular temporal logic.  According to the IPCC reports, most greenhouse gases come from burning fossil fuels, with additional emissions from agriculture, deforestation, industry, and waste. They drive global warming, which is projected to reach 1.5°C between 2021 and 2040, with 2°C likely to follow. Even 1.5°C is not considered safe for most nations, communities, and ecosystems, and according to IPCC, only deep, rapid, and sustained emission cuts can slow warming and reduce the escalating risks and damages. The 2024 state of the climate report, published in BioScience, presents even more worrying assessments. Among other things, the report cites surveys indicating that nearly 80% of these scientists anticipate global temperatures increasing by at least 2.5°C above preindustrial levels by the end of the century, and nearly half of them foresee a rise of at least 3°C.  Wright’s article suggests that the issue of amplifying doubt about climate change may have little to do with engagement with science but rather reflects a deeper temporal logic. This logic is rooted in a Whiggish account of progress to date, a resistance to the reality of the future and the desire for nostalgic restoration. I will explain these elements one by one. The first tier: Whiggism Wright disagrees with most scientific anticipations. His views are likely representative not only of the Trump II administration but also of conservative right-wing populism more generally. It is difficult to understand their climate denialism without an analysis of their views on time and temporality. The most important question concerns the reality of the future. At the first level, Wright provides a kind of textbook example of Whig history, portraying progress as linear, inevitable, and driven by liberal values. Herbert Butterfield introduced the idea of Whig history in his influential 1931 book The Whig Interpretation of History as a critique of a specific way of writing history that he regarded as flawed and intellectually dishonest. Focusing on inevitable progress distorts historical analysis by promoting simplified cause-and-effect reasoning and selective storytelling, emphasising present-day evaluation (and glorification) over understanding the real causes of historical change. In a Whiggish manner, Wright claims that the last 200 years have seen two big changes to the human condition: “human liberty” and affordable energy. As a result of these two things, life expectancy has nearly doubled, and the percentage of people living in extreme poverty has dropped from 90% to 10%. However, Wright’s argumentation is based on non-contextual and, in that sense, timeless representations of the world, despite its “progressivism”.  For example, consider the claim that extreme poverty has dropped from 90% to 10%. It is based on using a fixed dollar threshold, such as USD 2 per day, to measure poverty over 200 years. This is misleading because most people in the 19th century lived in largely non-monetised economies where subsistence needs were met outside of market exchange, and monetary income was minimal or irrelevant. These metrics also obscure shifting and context-bound definitions of basic needs; rely on incomplete historical data; and ignore the role of colonial dispossession and structural inequality in shaping global poverty. While it is true that life expectancy has doubled, largely due to improvements in hygiene and healthcare, the idea that extreme poverty has plummeted from 90% to under 10% also ignores the fact that the global population has grown eightfold, affecting the entire Earth system with devastating ecological and geological consequences. It further ignores that the rise in life expectancy and poverty reduction has come not only from liberalism or economic growth more generally but from ethical and political struggles and public health interventions. Often, these struggles have been fought in the name of socialism and won despite capitalist incentives, market mechanisms, and related political forces. The second tier: blockism At a deeper level, Wright’s views seem to presuppose what Roy Bhaskar calls “blockism”: the postulation of a simultaneous conjunctive totality of all events. This may sound abstract, but it has been a common assumption among many 20th-century physicists and philosophers that the universe forms a static, closed totality. This view stems from an atomist ontology, where individuals are seen as abstract, events follow regular patterns, time is viewed as spatial, and laws that can be expressed mathematically are considered reversible.  In such a conception, time appears as just another “spatial” dimension. According to the block universe model, the past, present, and future all exist equally and tenselessly. The universe is imagined as a four-dimensional geometric object, like a “block” of spacetime. Time is not something that “flows” or “passes”; instead, all moments are spatially extended points in a timeless whole. Blockism suggests that change and becoming are not truly real but are simply parts of our subjective experience.  The real challenge is to reconcile Whiggism and blockism. Wright is not a theorist and might not need to worry about the coherence of his ideas, but the issue is that Whiggism assumes movement, direction, and a normatively positive evolution of change, whereas the block universe denies real temporality: there is no becoming, no novelty, no agency – only timeless existence. Some versions of the block universe attempt to preserve development by proposing that the block grows. The “block” expands as new events are added to reality, but in this view, the present defines the upper boundary of the block, and the future is not truly real. This appears to be consistent with what Wright says about climate change. Everything he has to say about global warming is limited to one short paragraph: We will treat climate change as what it is: not an existential crisis but a real, physical phenomenon that is a by-product of progress. Yes, atmospheric CO2 has increased over time – but so has life expectancy. Billions of people have been lifted out of poverty. Modern medicine, telecommunications and global transportation became possible. I am willing to take the modest negative trade-off for this legacy of human advancement. From the ICJ’s perspective, this interpretation is dreadful, as the current impacts of climate change are already at odds with the rights of many groups of people. It also exhibits basic injustice, as many of the groups that suffer the most from these impacts have done next to nothing to cause the problem. However, here I am mostly concerned with the temporality of Wright’s claims. This temporality is a combination of Whiggism and blockism: so far, history has exhibited progress, but time and processes stop here, in our present moment. The third tier: nostalgia Wright’s view of time is not limited to an ultimately incoherent combination of Whiggism and blockism. There is also more than a mere hint of nostalgia. This is evident in the appeal of a Golden Age at the outset of his article: I am honoured to advance President Donald Trump’s policy of bettering lives through unleashing a golden age of energy dominance – both at home and around the world. The appeal to the Golden Age somewhat contradicts Whiggism. From a nostalgic perspective, it seems that society has been on a downward trajectory instead of progressing. In other words, regression must be possible. Within an overall Whiggish narrative, one can blame certain actors, such as the Democrats in the US political context, for causing moral and political decline.  A nationalist narrative of a “golden age” and a return to a better past (“making us great again”) is essentially connected to the denial of planetary-scale problems, such as climate change, that would clearly require novel global responses. Climate change from a real-time perspective By merging Whiggism with a block-universe ontology (either static or growing), one ends up with a pseudo-historicism that speaks of “progress” while erasing real time. In a way, such a view “performs change” through a highly selective historical narrative, while denying the ontological preconditions of real change. Real change – emergence, transformation, causation – requires a temporal ontology, where the future is real though not yet fully determined. Thus, there is no mention of global emissions that have continued to rise, their delayed effects, feedback loops, or emergent risks given multiple processes of intertwined changes. Are the basic IPCC models based on real historical time? IPCC models often treat the climate system as a bounded system with internally consistent and deterministic dynamics. The IPCC relies on modelling and uses Bayesian methods to assess uncertainties in climate projections. Bayesian statistics involve updating the probability of a hypothesis as more evidence becomes available, based on prior knowledge (priors) and new data (likelihoods). Such an approach tends to be conservative (based on moving averages, for example) and assumes the quantifiability of uncertainty. It may also convey illusory precision, especially when the underlying models or data are uncertain or incomplete. The IPCC models nonetheless indicate – in contrast to Wright – that the future is real, though the future is approached in a somewhat cautious and deterministic manner. However, many climate scientists go beyond the IPCC consensus by assuming that global heating may reach 2.5 °C or even above 3 °C degree warming by the end of the century.  From a critical scientific realist viewpoint, even such anticipations may be too circumspect. Assuming exponential growth (involving cascading events etc.) and given that recent data shows a rise from 1.0°C to 1.5°C in just 15 years (actual data taken on an annual basis, not moving averages), and using this as a basis for anticipating the future, we seem likely to reach the 2 °C mark in the 2040s and the 3 °C mark in the 2060s.  The plausibility of anticipations depends significantly on how the real openness of the future is treated. Anticipations are reflexive and can shape the future. Real time and historical change involves human freedom and ethics. The evolving universe, where time is real, is stratified, processual, and open-ended. Time involves genuine processes, real possibilities, agency, and emergent structures. Such characteristics indicate that the future is not predetermined but can be shaped by transformative agency.  To sum up, from a real historical time perspective, Wright’s combination of Whiggism, blockism, and nostalgia is a recipe for reactionary politics. Glorifying the present, thinking in a timeless way, and longing for a golden age of the past can play a major role in bringing about a dystopian planetary future.

Abstract We examine the roles of Gold and Bitcoin as a hedge, a safe haven, and a diversifier against the coronavirus disease 2019 (COVID-19) pandemic and the Ukraine War. Using a rolling window estimation of the dynamic conditional correlation (DCC)-based regression, we present a novel approach to examine the time-varying safe haven, hedge, and diversifier properties of Gold and Bitcoin for equities portfolios. This article uses daily returns of Gold, Bitcoin, S&P500, CAC 40, and NSE 50 from January 3, 2018, to October 15, 2022. Our results show that Gold is a better safe haven than the two, while Bitcoin exhibits weak properties as safe haven. Bitcoin can, however, be used as a diversifier and hedge. This study offers policy suggestions to investors to diversify their holdings during uncertain times. Introduction Financial markets and the diversity of financial products have risen in both volume and value, creating financial risk and establishing the demand for a safe haven for investors. The global financial markets have faced several blows in recent years. From the Global Financial Crisis (GFC) to the outbreak of the pandemic and uncertainty regarding economic policy measures of governments and central banks, the financial markets including equity markets around the world were faced with severe meltdowns. This similar behavior was observed in other markets including equity and commodity markets, resulting in overall uncertainty. In this scenario, the investors normally flock toward the safe-haven assets to protect their investment. In normal situations, investors seek to diversify or hedge their assets to protect their portfolios. However, the financial markets are negatively impacted when there are global uncertainties. Diversification and hedging methods fail to safeguard investors’ portfolios during instability because almost all sectors and assets are negatively affected (Hasan et al., 2021). As a result, investors typically look for safe-haven investments to safeguard their portfolios under extreme conditions (Ceylan, 2022). Baur and Lucey (2010) provide the following definitions of hedge, diversifier, and safe haven: Hedge: An asset that, on average, has no correlation or a negative correlation with another asset or portfolio. On average, a strict hedge has a (strictly) negative correlation with another asset or portfolio.Diversifier: An asset that, on average, has a positive correlation (but not perfect correlation) with another asset or portfolio. Safe haven: This is the asset that in times of market stress or volatility becomes uncorrelated or negatively associated with other assets or a portfolio. As was previously indicated, the significant market turbulence caused by a sharp decline in consumer spending, coupled with insufficient hedging opportunities, was a common feature of all markets during these times (Yousaf et al., 2022). Nakamoto (2008) suggested a remedy by introducing Bitcoin, a “digital currency,” as an alternative to traditional fiduciary currencies (Paule-Vianez et al., 2020). Bitcoin often described as “Digital Gold” has shown greater resilience during periods of crises and has highlighted the potential safe haven and hedging property against uncertainties (Mokni, 2021). According to Dyhrberg (2016), the GFC has eased the emergence of Bitcoin thereby strengthening its popularity. Bouri et al. (2017) in their study indicate that Bitcoin has been viewed as a shelter from global uncertainties caused by conventional banking and economic systems. Recent research has found that Bitcoin is a weak safe haven, particularly in periods of market uncertainty like the coronavirus disease 2019 (COVID-19) crisis (Conlon & McGee, 2020; Nagy & Benedek, 2021; Shahzad et al., 2019; Syuhada et al., 2022). In contrast to these findings, a study by Yan et al. (2022) indicates that it can function as a strong safe haven in favorable economic times and with low-risk aversion. Ustaoglu (2022) also supports the strong safe-haven characteristic of Bitcoin against most emerging stock market indices during the COVID-19 period. Umar et al. (2023) assert that Bitcoin and Gold are not reliable safe-havens. Singh et al. (2024) in their study reveal that Bitcoin is an effective hedge for investments in Nifty-50, Sensex, GBP–INR, and JPY–INR, at the same time a good diversifier for Gold. The study suggests that investors can incorporate Bitcoin in their portfolios as a good hedge against market volatility in equities and commodities markets. During the COVID-19 epidemic, Barbu et al. (2022) investigated if Ethereum and Bitcoin could serve as a short-term safe haven or diversifier against stock indices and bonds. The outcomes are consistent with the research conducted by Snene Manzli et al. (2024). Both act as hybrid roles for stock market returns, diversifiers for sustainable stock market indices, and safe havens for bond markets. Notably, Bhuiyan et al. (2023) found that Bitcoin provides relatively better diversification opportunities than Gold during times of crisis. To reduce risks, Bitcoin has demonstrated a strong potential to operate as a buffer against global uncertainty and may be a useful hedging tool in addition to Gold and similar assets (Baur & Lucey, 2010; Bouri et al., 2017; Capie et al., 2005; Dyhrberg, 2015). According to Huang et al. (2021), its independence from monetary policies and minimal association with conventional financial assets allow it to have a safe-haven quality. Bitcoins have a substantial speed advantage over other assets since they are traded at high and constant frequencies with no days when trading is closed (Selmi et al., 2018). Additionally, it has been demonstrated that the average monthly volatility of Bitcoin is higher than that of Gold or a group of international currencies expressed in US dollars; nevertheless, the lowest monthly volatility of Bitcoin is lower than the maximum monthly volatility of Gold and other foreign currencies (Dwyer, 2015). Leverage effects are also evident in Bitcoin returns, which show lower volatilities in high return periods and higher volatilities in low return times (Bouri et al., 2017; Liu et al., 2017). According to recent research, Bitcoins can be used to hedge S&P 500 stocks, which increases the likelihood that institutional and retail investors will build secure portfolios (Okorie, 2020). Bitcoin demonstrates strong hedging capabilities and can complement Gold in minimizing specific market risks (Baur & Lucey, 2010). Its high-frequency and continuous trading further enrich the range of available hedging tools (Dyhrberg, 2016). Moreover, Bitcoin spot and futures markets exhibit similarities to traditional financial markets. In the post-COVID-19 period, Zhang et al. (2021) found that Bitcoin futures outperform Gold futures.Gold, silver, palladium, and platinum were among the most common precious metals utilized as safe-haven investments. Gold is one such asset that is used extensively (Salisu et al., 2021). Their study tested the safe-haven property of Gold against the downside risk of portfolios during the pandemic. Empirical results have also shown that Gold functions as a safe haven for only 15 trading days, meaning that holding Gold for longer than this period would result in losses to investors. This explains why investors buy Gold on days of negative returns and sell it when market prospects turn positive and volatility decreases (Baur & Lucey, 2010). In their study, Kumar et al. (2023) tried to analyse the trends in volume throughout futures contracts and investigate the connection between open interest, volume, and price for bullion and base metal futures in India. Liu et al. (2016) in their study found that there is no negative association between Gold and the US stock market during times of extremely low or high volatility. Because of this, it is not a strong safe haven for the US stock market (Hood & Malik, 2013). Post-COVID-19, studies have provided mixed evidence on the safe-haven properties of Gold (Bouri et al., 2020; Cheema et al., 2022; Ji et al., 2020). According to Kumar and Padakandla (2022), Gold continuously demonstrates safe-haven qualities for all markets, except the NSE, both in the short and long term. During the COVID-19 episode, Gold’s effectiveness as a hedge and safe-haven instrument has been impacted (Akhtaruzzaman et al., 2021). Al-Nassar (2024) conducted a study on the hedge effectiveness of Gold and found that it is a strong hedge in the long run. Bhattacharjee et al. (2023) in their paper examined the symmetrical and asymmetrical linkage between Gold price levels and the Indian stock market returns by employing linear autoregressive distributed lag and nonlinear autoregressive distributed lag models. The results exhibit that the Indian stock market returns and Gold prices are cointegrated. According to the most recent study by Kaczmarek et al. (2022), Gold has no potential as a safe haven, despite some studies on the COVID-19 pandemic showing contradictory results. The co-movements of Bitcoin and the Chinese stock market have also normalized as a result of this epidemic (Belhassine & Karamti, 2021). Widjaja and Havidz (2023) verified that Gold was a safe haven asset during the COVID-19 pandemic, confirming the Gold’s safe-haven characteristic. As previously pointed out, investors value safe-haven investments in times of risk. Investors panic at these times when asset prices fall and move from less liquid (risky) securities to more liquid (safe) ones, such as cash, Gold, and government bonds. An asset must be bought and sold rapidly, at a known price, and for a reasonably modest cost to be considered truly safe (Smales, 2019). Therefore, we need to properly re-examine the safe-haven qualities of Gold and Bitcoin due to the mixed evidences regarding their safe-haven qualities and the impact of COVID-19 and the war in Ukraine on financial markets. This work contributes to and deviates from the body of existing literature in the following ways. We propose a novel approach in this work to evaluate an asset’s time-varying safe haven, hedge, and diversifier characteristics. This research examines the safe haven, hedging, and diversifying qualities of Gold and Bitcoin against the equity indices; S&P 500, CAC 40, and NSE 50. Through the use of rolling window estimation, we extend the methodology of Ratner and Chiu (2013) by estimating the aforementioned properties of the assets. Comparing rolling window estimation to other conventional techniques, the former will provide a more accurate representation of an asset’s time-varying feature. This study explores the conventional asset Gold’s time-varying safe haven, hedging, and diversifying qualities during crises like the COVID-19 pandemic and the conflict in Ukraine. We use Bitcoin, an unconventional safe-haven asset, for comparison. Data and Methodology We use the daily returns of three major equity indices; S&P500, CAC 40, and NSE 50 from January 3, 2018, to October 15, 2022. The equity indices were selected to represent three large and diverse markets namely the United States, France, and India in terms of geography and economic development. We assess safe-haven assets using the daily returns of Gold and Bitcoin over the same time. Equity data was collected from Yahoo Finance, Bitcoin data from coinmarketcap.com, and Gold data from the World Gold Council website. Engle (2002) developed the DCC (Dynamic Conditional Correlation)-GARCH model, which is frequently used to assess contagion amid pandemic uncertainty or crises. Time-varying variations in the conditional correlation of asset pairings can be captured using the DCC-GARCH model. Through employing this model, we can analyse the dynamic behavior of volatility spillovers. Engle’s (2002) DCC-GARCH model contains two phases; 1. Univariate GARCH model estimation2. Estimation of time-varying conditional correlation. For its explanation, mathematical characteristics, and theoretical development, see here [insert the next link in “the word here” https://journals.sagepub.com/doi/10.1177/09711023251322578] Results and Discussion The outcomes of the parameters under the DCC-GARCH model for each of the asset pairs selected for the investigation are shown in Table 1.   First, we look at the dynamical conditional correlation coefficient, ρ.The rho value is negative and insignificant for NSE 50/Gold, NSE 50 /BTC, S&P500/Gold, and S&P500/BTC indicating a negative and insignificant correlation between these asset pairs, showing Gold and Bitcoin as potential hedges and safe havens. The fact that ρ is negative and significant for CAC 40/Gold suggests that Gold can be a safe haven against CAC 40 swings. The asset pair CAC/BTC, on the other hand, has possible diversifier behavior with ρ being positive but statistically insignificant. Next, we examine the behavior of the DCC-GARCH parameters; α and β. We find that αDCC is statistically insignificant for all the asset pairs, while βDCC is statistically significant for all asset pairs. βDCC quantifies the persistence feature of the correlation and the extent of the impact of volatility spillover in a particular market’s volatility dynamics. A higher βDCC value implies that a major part of the volatility dynamics can be explained by the respective market’s own past volatility. For instance, the NSE 50/Gold’s βDCC value of 0.971 shows that there is a high degree of volatility spillover between these two assets, with about 97% of market volatility being explained by the assets’ own historical values and the remainder coming from spillover. Thus, we see that the volatility spillover is highly persistent (~0.8) for all the asset pairs except NSE 50/BTC. The results above show that the nature of the dynamic correlation between the stock markets, Bitcoin and Gold is largely negative, pointing toward the possibility of Gold and Bitcoin being hedge/safe haven. However, a detailed analysis is needed to confirm the same by employing rolling window analysis, and we present the results in the forthcoming section. We present the rolling window results for S&P500 first. We present the regression results for Gold in Figure 1 and Bitcoin in Figure 2   Figure 1. Rolling Window Regression Results for S&P500 and Gold.Note: Areas shaded under factor 1 represent significant regression coefficients. In Figure 1, we examine the behavior of β0 (intercept term), β1, β2, and β3 (partial correlation coefficients). The intercept term β0 will give an idea about whether the asset is behaving as a diversifier or hedge. Here, the intercept term shows significance most of the time. However, during 2018, the intercept was negative and significant, showing that it could serve as a hedge during geopolitical tensions and volatilities in the global stock market. However, during the early stages of COVID-19, we show that the intercept is negative and showing statistical significance, suggesting that Gold could serve as a hedge during the initial shocks of the pandemic. These findings are contrary to the results in the study by Tarchella et al. (2024) where they found hold as a good diversifier. Later, we find the intercept to be positive and significant, indicating that Gold could act as a potential diversifier. But during the Russia-Ukraine War, Gold exhibited hedge ability again. Looking into the behavior of β1, which is the partial correlation coefficient for the tenth percentile of return distribution shows negative and insignificant during 2018. Later, it was again negative and significant during the initial phases of COVID-19, and then negative in the aftermath, indicating that Gold could act as a weak safe haven during the COVID-19 pandemic. Gold could serve as a strong safe haven for the SP500 against volatility in the markets brought on by the war in Ukraine, as we see the coefficient to be negative and large during this time. From β2 and β3, the partial correlation coefficients of the fifth and first percentile, respectively, show that Gold possesses weak safe haven properties during COVID-19 and strong safe haven behavior during the Ukraine crisis. Next, we examine the characteristics of Bitcoin as a hedge/diversifier/safe haven against the S&P500 returns. We present the results in Figure 2.   Figure 2. Rolling Window Regression Results for S&P500 and Bitcoin.Note: Areas shaded under factor 1 represent significant regression coefficients. Like in the previous case, we begin by analysing the behavior of the intercept coefficient, which is β0. As mentioned earlier the intercept term will give a clear picture of the asset’s hedging and diversifier property. In the period 2018–2019, the intercept term is positive but insignificant. This could be due to the large volatility in Bitcoin price movements during the period. It continues to be minimal (but positive) and insignificant during 2019–2020, indicating toward weak diversification possibility. Post-COVID-19 period, the coefficient shows the significance and positive value, displaying the diversification potential. We see that the coefficient remains positive throughout the analysis, confirming Bitcoin’s potential as a diversifier. Looking into the behavior of β1 (the partial correlation coefficient at tenth percentile), it is positive but insignificant during 2018. The coefficient is having negative sign and showing statistical significance in 2019, suggesting that Bitcoin could be a good safe haven in that year. This year was characterized by a long list of corporate scandals, uncertainties around Brexit, and tensions in global trade. We can observe that throughout the COVID-19 period, the coefficient is showing negative sign and negligible during the March 2020 market meltdown, suggesting inadequate safe-haven qualities. However, Bitcoin will regain its safe-haven property in the coming periods, as the coefficient is negative and significant in the coming months. The coefficient is negative and shows statistical significance during the Ukrainian crisis, suggesting strong safe-haven property. Only during the Ukrainian crisis could Bitcoin serve as a safe haven, according to the behavior of β2, which displays the partial correlation coefficient at the fifth percentile. Bitcoin was a weak safe haven during COVID-19 and the Ukrainian crisis, according to β3, the partial correlation coefficient for the first percentile (coefficient negative and insignificant). According to the overall findings, Gold is a stronger safe haven against the S&P 500’s swings. This result is consistent with the previous studies of Triki and Maatoug (2021), Shakil et al. (2018), Będowska-Sójka and Kliber (2021), Drake (2022), and Ghazali et al. (2020), etc. The same analysis was conducted for the CAC 40 and the NSE 50; the full analysis can be found here [insert the next link in “the word here” https://journals.sagepub.com/doi/10.1177/09711023251322578]. However, it is important to highlight the respective results: In general, we may say that Gold has weak safe-haven properties considering CAC40. We can conclude that Bitcoin’s safe-haven qualities for CAC40 are weak. We can say that Gold showed weak safe-haven characteristics during the Ukraine crisis and good safe-haven characteristics for the NSE50 during COVID-19. We may say that Bitcoin exhibits weak safe haven, but strong hedging abilities to NSE50. Concluding Remarks In this study, we suggested a new method to evaluate an asset’s time-varying hedge, diversifier, and safe-haven characteristics. We propose a rolling window estimation of the DCC-based regression of Ratner and Chiu (2013). Based on this, we estimate the conventional asset’s time-varying safe haven, hedging, and diversifying properties during crises like the COVID-19 pandemic and the conflict in Ukraine. For comparison purposes, we include Bitcoin, a nonconventional safe-haven asset. We evaluate Gold and Bitcoin’s safe haven, hedging, and diversifier properties to the S&P 500, CAC 40, and NSE 50 variations. We use a rolling window of length 60 to estimate the regression. From the results, we find that Gold can be considered as a better safe haven against the fluctuations of the S&P 500. In the case of CAC 40, Gold and Bitcoin have weak safe-haven properties. While Bitcoin demonstrated strong safe-haven characteristics during the Ukraine crisis, Gold exhibited strong safe-haven characteristics during COVID-19 for the NSE 50. Overall, the findings indicate that Gold is the better safe haven. This outcome is consistent with earlier research (Będowska-Sójka & Kliber, 2021; Drake, 2022; Ghazali et al., 2020; Shakil et al., 2018; Triki & Maatoug, 2021). When it comes to Bitcoin, its safe-haven feature is weak. Bitcoin, however, works well as a diversifier and hedge. Therefore, from a policy perspective, investing in safe-haven instruments is crucial to lower the risks associated with asset ownership. Policymakers aiming to enhance the stability of financial portfolios might encourage institutional investors and other market players to incorporate Gold into their asset allocations. Gold’s strong safe-haven qualities, proven across various market conditions, make it a reliable choice. Gold’s performance during crises like COVID-19 highlights its potential to mitigate systemic risks effectively. Further, Bitcoin could also play a complementary role as a hedge and diversifier, especially during periods of significant volatility such as the Ukraine crisis. While Bitcoin’s safe-haven characteristics are relatively weaker, its inclusion in a diversified portfolio offers notable value and hence it should not be overlooked. Further, policymakers may consider how crucial it is to monitor dynamic correlations and periodically rebalance portfolios to account for shifts in the safe haven and hedging characteristics of certain assets. Such measures could help reduce the risks of over-reliance on a single asset type and create more resilient portfolios that can better withstand global economic shocks. For future research, studies can be conducted on the estimation of the rolling window with different widths. This is important to understand how the safe-haven property changes across different holding periods. Further, more equity markets would be included to account for the differences in market capitalization and index constituents. This study can be extended by testing these properties for multi-asset portfolios as well. We intend to take up this study in these directions in the future. Data Availability StatementNot applicable.Declaration of Conflicting InterestsThe authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.FundingThe authors received no financial support for the research, authorship, and/or publication of this article.ReferencesAkhtaruzzaman M., Boubaker S., Lucey B. M., & Sensoy A. (2021). Is gold a hedge or a safe-haven asset in the COVID-19 crisis? Economic Modelling, 102, 105588. Crossref. Web of Science.Al-Nassar N. S. (2024). Can gold hedge against inflation in the UAE? A nonlinear ARDL analysis in the presence of structural breaks. PSU Research Review, 8(1), 151–166. Crossref.Barbu T. C., Boitan I. A., & Cepoi C. O. (2022). Are cryptocurrencies safe havens during the COVID-19 pandemic? A threshold regression perspective with pandemic-related benchmarks. Economics and Business Review, 8(2), 29–49. 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In recent years, US leadership has embraced techno-nationalism amid geopolitical and technological rivalry with China, aiming to minimise reliance on imported chips from Asia. These components are crucial for producing consumer goods, military hardware, and AI systems. The United States set the ambitious goal of developing a self-sufficient semiconductor supply chain during Donald Trump’s first term, and continued under Joe Biden. There is consensus in the United States on the critical role of unfettered access to chips when it comes to ensuring economic and national security. It is unlikely that this technological policy dynamic will undergo significant shifts in the foreseeable future. Despite a shared objective among both Republicans and Democrats to revive the US semiconductor industry, their approaches diverge significantly. Donald Trump has his own vision for advancing this sector, one that contrasts sharply with Joe Biden’s strategy. For instance, Trump has criticised aspects of Biden-era initiatives, including the 2022 CHIPS and Science Act, which he has called counterproductive. Trump, on the other hand, favours a more aggressive tariff policy and a reduction in federal spending, arguing that major tech companies can do well without additional government support. The future balance of power—both technological and geopolitical—among the key global actors will be shaped by the development trajectory of the US semiconductor industry. Biden’s semiconductor legacy The United States holds a dominant position in chip design, but maintains a relatively modest share in global semiconductor manufacturing—just 10 percent according to SIA data in 2022, and slightly up to 11 percent according to 2025 data provided by TrendForce research firm. Major US tech giants like Nvidia or Qualcomm remain heavily reliant on chips produced in Taiwan. This dependency has increasingly been seen as unacceptable by US leadership, especially in the context of the ongoing tech war with China. Washington now views such reliance as a significant national security risk. During Donald Trump’s first presidential term, the decision was made to attract leading chip manufacturers—most notably Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker—to set up operations in the United States. This initiative proved successful: in 2020, TSMC agreed to invest $12 billion to build a chip fabrication plant in Arizona (Fab 21).   The Biden administration continued Trump’s push to revitalise the semiconductor industry. In August 2022, the CHIPS and Science Act was passed, allocating about $53 billion in government subsidies for the semiconductor sector, along with tax incentives to encourage both foreign and domestic firms to establish chip manufacturing operations on US soil. Additionally, the CHIPS for America programme was introduced to address several key goals, namely, to secure a stable supply chain for both cutting-edge and legacy semiconductors, to reinforce US leadership in R&D, and to boost employment, as investment in the chip industry was expected to generate hundreds of thousands of new jobs in microelectronics-related fields. Biden’s programme has borne fruit. Major chipmakers have launched large-scale construction of fabs across the United States. In 2022, Intel started building a $28 billion facility in Ohio; Samsung initiated two plants in Texas worth about $40 billion; and TSMC decided to expand its Arizona site to three modules, increasing its total investment from $12 billion to $65 billion. According to TSMC CEO C.C. Wei, the Arizona facility began mass production in the fourth quarter of 2024 using its N4 (4nm class) process technology, with performance comparable to its fabs in Taiwan. This marks the most advanced semiconductor production facility currently operating in the United States. Plans are in place to launch a second module for 3nm chip production by 2028, followed by a third module by 2030, which will manufacture 2nm and 1.6nm chips and their variants. The Biden team aimed for the United States to capture 20 percent of global advanced chip manufacturing by 2030. Democrats have adopted a comprehensive approach to rebuilding the semiconductor industry not just focusing on building advanced fabs, but also investing in support areas such as chip testing and packaging, materials production, and R&D. A substantial $13 billion in federal funds has been earmarked for these purposes. For instance, grants and loans were used to support GlobalFoundries’ plans to build an advanced packaging and photonics centre in New York State. Arizona State University also received significant support from the US Department of Commerce, including a $100 million allocation for research and development in next-generation chip packaging technologies. Wide geographic distribution is a striking feature of the emerging US semiconductor supply chain (Figure 1). Key activities are being established across numerous states: Oregon (semiconductor manufacturing), Idaho (semiconductor and material manufacturing), Utah (semiconductor manufacturing), Montana (equipment manufacturing), Colorado (semiconductor and material manufacturing), New Mexico (packaging), Kansas (semiconductor manufacturing and packaging), Louisiana (equipment manufacturing), Missouri (materials), Minnesota (semiconductor manufacturing),Michigan (materials),Indiana (packaging and semiconductor manufacturing), Ohio (materials and semiconductor manufacturing), Vermont (semiconductor R&D and manufacturing), Pennsylvania (materials), North Carolina (semiconductor manufacturing), Georgia (materials and semiconductor manufacturing), and Florida (materials and semiconductor manufacturing). Among these, several states stand out for their significance and comprehensive involvement: California (semiconductor manufacturing and R&D), Arizona (semiconductor, equipment, and material manufacturing, packaging, R&D), Texas (semiconductor and material manufacturing, packaging, R&D), and New York (materials, semiconductor manufacturing, and R&D).   According to a 2024 study by the Boston Consulting Group commissioned by the Semiconductor Industry Association (SIA), over 90 projects have been launched in 28 states since the CHIPS Act was passed, totalling nearly $450 billion in private investment. However, the Biden administration did not pursue full semiconductor self-sufficiency as a goal. There was recognition that recreating the entire supply chain domestically would, even at the initial stage, require a vast amount of time and financial resourcesНадпись: MichiganНадпись: IndianaНадпись: Pennsylvania estimated at around $1 trillion. Therefore, US policymakers have advocated for a collective semiconductor supply chain among allies and partners by building international alliances. In 2022, the Unite States proposed creating the CHIP 4 alliance (United States, South Korea, Japan, and Taiwan), which, with coordinated efforts, could have become a dominant force in the semiconductor industry capable of influencing nearly every segment of the global value chain, with the exception of assembly and testing, where mainland China currently plays a leading role. In this way, Trump’s initiative to revive the semiconductor industry has not only continued under Biden, but evolved into a more ambitious and costly programme. The SIA, in its above report, painted an optimistic picture for the future of the US semiconductor sector. It projects that chip manufacturing capacity in the United States will triple over the next decade (2022–2032), growing by 203 percent. This expansion is expected to require $646 billion in investment, or 28 percent of global capital spending in the semiconductor industry. As a result, the United States could increase its share of global chip production from the current 10 percent to 14 percent by 2032. Additionally, experts estimate that the new projects will create over 58,000 new jobs in the semiconductor sector and hundreds of thousands more in related industries.   Despite its ambitious nature, the initial phase of Biden’s semiconductor programme has revealed several challenges. The industry has run into numerous internal obstacles slowing the construction of manufacturing facilities, including a shortage of skilled labour, high labour and construction material costs, bureaucratic hurdles (e.g., obtaining environmental permits), slow disbursement of promised subsidies by the US authorities, union-related delays, cultural differences, and more. These issues have caused delays in launching chip fabrication plants, thereby slowing the pace at which the US can achieve relative technological autonomy in the rapidly evolving semiconductor field. For example, TSMC postponed the start of mass production at the first module of Fab 21 from 2024 to 2025, and delayed the second module from 2026 to 2027–2028. Intel’s costly attempt to reclaim leadership in advanced chip manufacturing has strained its budget, forcing the company to delay its Ohio fab launch from 2025 to 2030. Samsung, initially planning to start production in Texas in the second half of 2024, pushed the timeline to 2025. These delays in fab construction also impacted the schedules of launching supplier plants, including chemical and material producers like LCY Chemical, Solvay, Chang Chun Group, KPPC Advanced Chemicals (Kanto-PPC), and Topco Scientific. The external component of the Biden administration’s technology policy has also failed to develop as envisioned. After several years of existence, the CHIP 4 has failed to become a multilateral coordination mechanism, and its potential members have not assumed any binding commitments. Only one virtual meeting was held in 2023. The reason lies in internal disagreements within the alliance and concerns about various risks, including geopolitical ones. Under the Biden administration, the United States made a strong start in the semiconductor sector, launching a wide range of fab construction projects and attracting billions of dollars in public and private investment. However, the process of reviving the US semiconductor industry has proven slower than anticipated. Government subsidies have been disbursed sluggishly, with some companies yet to receive their funding, and the construction of many high-tech industrial facilities has been postponed. Moreover, Biden overestimated the willingness of US allies and partners to join formal technological alliances. Trump’s radical approach To encourage both domestic and foreign chip suppliers to set up manufacturing in the United States, Donald Trump, in contrast to Joe Biden, chose coercion (tariffs) over incentives (government subsidies). Criticising his predecessor’s CHIPS Act, Trump argued that companies didn’t need money, but rather motivation in the form of import tariffs ranging from 25 percent to 100 percent. In his view, such measures would compel businesses to invest in US chip manufacturing, especially since these companies have the financial capacity and, therefore, don’t need to rely on government funding. Almost immediately after taking office, Trump threatened chip manufacturers with higher tariffs. At first glance, this move might seem economically illogical. Why, for instance, punish TSMC—a key partner of major US fabless companies like Nvidia, Apple, and Qualcomm—especially when there is no comparable alternative, either in the United States or globally? Even Intel, despite its struggles, depends on wafers from the Taiwanese firm (its import dependency is about 30 percent). Yet despite apparent lack of logic, the “stick” approach proved effective. In early March 2025, TSMC announced plans to invest approximately $100 billion to build three new fabs for high-performance semiconductor wafers, two advanced chip packaging plants, and one R&D centre. This raises the question: did the world’s largest chipmaker really get spooked by Trump’s tariff threats and, therefore, decide to make an unprecedented investment in the US economy? In theory, TSMC—sitting in the centre of the global microelectronics industry—could have passed tariff-related costs on to its American clients, who would have had little choice but to continue purchasing its products due to the lack of viable alternatives. Furthermore, a significant share of TSMC’s semiconductors is not shipped directly to the United States, but instead follows a supply chain tour through Asia, where the bulk of chip packaging, testing, and electronics assembly occurs (this infrastructure is only just beginning to take shape in the United States, and that process is anything but fast). Analysts at Bernstein suggest that political pressure, rather than tariffs themselves, drove TSMC’s decision. That assessment holds some merit, but it appears that a combination of factors was at play. First, TSMC itself is interested in expanding its global presence. Taiwan’s Minister of Economic Affairs Kuo Jyh-Huei commented on TSMC’s $100 billion investment in the US semiconductor sector by saying, “TSMC already has plants in the United States and Japan, and is now building a new one in Germany. This has nothing to do with tariffs. TSMC’s global expansion is a major development.” Similarly, in 2020 during Trump’s first term, company representatives said that the decision to build a plant in Arizona was “based on business needs.” Indeed, the move offers several benefits to TSMC, including increased company capitalisation and minimised risks in the event of conflict with mainland China or natural disasters (earthquakes are not uncommon in Taiwan). Second, the United States remains TSMC’s primary market, and the tariff threat did play its part. In Taiwan, there’s an understanding that when Trump talks about higher tariffs, he isn’t bluffing, because his seriousness was evident during his first term and was experienced first-hand by Canada and Mexico. On April 2, 2025, nearly the entire rest of the world—including Taiwan—faced a new wave of tariffs, with Taiwanese exports to the United States hit by a 32 percent duty (though semiconductors were not yet affected). A 100-percent tariff on semiconductors is unlikely, as it would significantly damage the market value of US tech firms. Still, protective barriers on semiconductors are expected—Trump’s administration has promised to implement them in the coming months. These measures aim to level the production cost of chips between the United States and Taiwan, thereby enhancing the competitiveness of US-made semiconductors. And finally, TSMC, together with the Taiwanese authorities, is not willing to mar relations with the United States for political reasons. This became evident from TSMC’s earlier decision to support US sanctions against mainland China by refusing to supply its most advanced chips manufactured using 7nm and more sophisticated process technologies even though that market had been a significant source of profit. After TSMC announced plans to expand its presence in the United States, the Trump administration decided to take more radical action and to scrap the CHIPS and Science Act, a signature achievement of the Biden administration. However, some Republican members of Congress are calling for the law to be preserved, albeit with certain amendments. Trump’s hands are not completely untied in this regard, so it is unlikely he can ignore Congress’s position. Even if the legislation gets amended, the process will likely be drawn out, as the CHIPS and Science Act received bipartisan support and has many supporters among Republicans. Another strategically important issue for the Trump administration is the competitiveness of domestic manufacturers. According to the Taiwanese leadership, TSMC will continue to expand operations in Taiwan, and the most advanced semiconductor technologies will not leave the country. For “the most powerful AI chips in the world to be made right here in America” efforts will be needed on the part of national champions—and soon. In 2025, the leader in producing the most advanced 2nm chips will be determined. The main contenders in this race are TSMC, Samsung, and Intel. Intel, however, finds itself in a difficult position. The company has been facing serious financial troubles for several years and lags behind competitors in mastering cutting-edge production processes. The year 2024 was one of Intel’s most challenging: it underwent a major restructuring (creating a separate chip manufacturing unit, Intel Foundry), posted record losses of $18 billion, and saw a significant drop in its stock price. As a result, about 15 percent of the workforce, including CEO Pat Gelsinger, was laid off; dividend payments were suspended; and a sweeping cost-cutting plan was launched, including deep cuts in capital expenditures over the coming years and a scaling back of global expansion plans. According to Intel Products CEO Michelle Johnston Holthaus, the company failed to capitalise effectively on the artificial intelligence boom and continues to fall behind its competitors technologically. Although Intel plans to begin 18A (2nm) chip production in 2025, there are no guarantees of competitiveness in power efficiency, performance, yield rate, cost, or timely mass production. In March, media reported that Nvidia and Broadcom began testing certain chip components, but such testing, of course, does not guarantee Intel will secure orders. Apparently, the Trump administration itself has doubts about the US company’s capabilities, as it has proposed that TSMC acquire shares in Intel Foundry. Negotiations with the Asian manufacturer began only in February 2025, meaning they are still at a very early stage.   What short-term challenges does the Trump administration face in revitalising the US semiconductor industry? Technological lag There is a high likelihood that the United States will continue to lag behind Taiwan for several years in the production of advanced semiconductors. TSMC plans to begin producing chips using a 1.4nm process by 2028, while on US soil—if deadlines aren’t pushed back again—the Taiwanese firm will only be producing 3nm chips by that time. Although some hope is being placed on Intel, there is no guarantee that the American champion will be able to compete with TSMC, or that a potential collaboration with TSMC (if it acquires a stake in Intel Foundry) will be successful. Inadequate production capacity Experts estimate that the output capacity of TSMC’s factories under construction in Arizona is less than one-fifth of the company’s 5nm and 3nm capacity in Taiwan. According to analysts at Bernstein Research, with the deployment of additional production in Arizona, the United States could raise its self-sufficiency in advanced chip production to 40-50 percent between 2030 and 2032. In the near term, this would only cover about half of the chip demand from US tech giants. Moreover, TSMC has not specified clear timelines or technologies for its US expansion. Intel could partly close the gap, but that depends on how competitive its chips are and how quickly it can overcome its financial difficulties. Slow rollout of production facilities TrendForce forecasts that the US share of global advanced chip production could grow from 11 percent to 22 percent by 2030. However, the construction of TSMC’s first Arizona plant took nearly five years, and there are no guarantees that future factories will be built fast enough to double US chip output by 2030. Labour shortage Developing a relatively self-sufficient microelectronics ecosystem requires a highly skilled workforce. However, the United States is facing severe staff shortages. By 2030, estimates suggest a shortfall of 67,000 to 90,000 professionals in the semiconductor field. China’s response to US sanctions The United States is not the only country leveraging interdependence in the semiconductor industry as a tool of pressure. China is responding in kind, though currently in a relatively restrained manner. In 2024, the Chinese government decided to completely ban exports of gallium, germanium, antimony, and ultra-hard materials to the United States even though the restrictions apply only to direct shipments. These actions not only drive up raw material prices (e.g., antimony prices more than tripled since early 2024), but also force US authorities to consider domestic mining and search for alternative suppliers abroad. High production costs According to the SIA, building and operating chip fabs in the United States is 30 to 50 percent more expensive than in Asia. Unofficial reports suggest that chips made at Fab 21 in Arizona cost 10 percent to 30 percent more than their Taiwanese counterparts (more precise figures are not publicly available). The high cost is attributed to expensive construction of facilities, high salaries (US engineers earn three times more than their Taiwanese counterparts, incomplete domestic semiconductor supply chains (some materials must still be imported)—TSMC CEO has complained about it—and complex logistics (finished wafers often need to be sent back to Taiwan or elsewhere for packaging).70 Even if tariffs eventually equalise chip pricing, US fabless companies like Apple or Nvidia may still find it more economical to source chips from Asia, where a properly functioning semiconductor ecosystem already exists—unlike in the United States, where such infrastructure is still in its infancy. Trump’s current tariff policy Imposing tariffs could lead to a significant increase in prices for components, equipment, and materials, while also injecting uncertainty into the semiconductor industry. For instance, it remains unclear how semiconductor manufacturers will operate under new tariffs on imported chip-making equipment sourced from the EU, Japan, South Korea, and Taiwan. The cost of such equipment can reach hundreds of millions of dollars—for example, the latest Low-NA EUV lithography machine from Dutch company ASML is priced at $235 million. If Intel, TSMC, and other firms are required to pay import duties of 20 percent or more, chip manufacturing in the United States will become prohibitively expensive, undermining investment plans of the manufacturers that have committed to building advanced fabs on American soil. Naturally, US officials understand that sharp moves in semiconductor policy—such as an aggressive tariff regime—carry significant risk and could spark a true technological crisis. In April 2025, the US Department of Commerce’s Bureau of Industry and Security (BIS) launched an investigation under Section 232 of the Trade Expansion Act of 1962 to determine the impact of semiconductor imports and related equipment on national security. Interested parties submitted comments, many urging extreme caution in this highly sensitive sector, which depends on a complex global supply chain split across multiple phases and countries. Thus, SIA recommended that any tariffs be phased in gradually to allow the US industry to continue functioning efficiently until domestic production capabilities are fully established. The US Chamber of Commerce called for restraint, warning that comprehensive tariffs on the semiconductor supply chain could damage US industry and undermine cooperation with allies and partners in achieving key national security goals. The Chamber also noted that foreign semiconductor companies have made long-term investment commitments to build capacity in the United States, and that political uncertainty and instability could jeopardise the stated goal of re-shoring semiconductor supply chains. *** As TSMC founder Morris Chang once said, America’s effort to ramp up its own chip production may well prove to be “a very expensive exercise in futility.” Microelectronics is one of the most complex industries in the world requiring not only massive financial investment, but also time. For decades, the industry developed within the framework of global division of labour. Now, building a relatively self-sufficient supply chain within a single country could take just as long. Yet, in the medium and long term, America’s push to revive its semiconductor industry may prove justified. The United States holds a strong position in the sector, and US companies control about 50 percent of the global semiconductor market. Furthermore, the United States remains a powerful magnet for talent, and possesses vast financial and political resources. Some experts believe that over time, the United States could weaken Taiwan’s dominance as the global hub of advanced chip manufacturing. The resurgence of the US semiconductor industry will reshape the global technological order in three key ways. First, it will trigger a transformation of the global semiconductor supply chain. Second, it will lead to greater US independence from imports of critical technologies, which means erosion of importance of some players in the industry, weakening their “technological shield”. Finally, it will cement US technological superiority in many critical industries, from AI to military systems, accelerating a global technological divide with profound geopolitical consequences. Indeed, America has the potential to become one of the world’s leading semiconductor production centres, provided that several key conditions are met, such as a favourable geopolitical environment, domestic political stability, and the absence of disruptive black swan events. However, Trump’s risky tariff policy could trigger unpredictable cascading effects, both domestically (e.g., higher prices for electronics and microelectronics products) and internationally (e.g., retaliatory tariffs by US trade partners), posing serious threats for the US semiconductor industry. First published in the Valdai Discussion Club.

Note: some parts of the article have been excluded, if you want to go deep in the article please check  https://doi.org/10.1177/01445987251314504 for the complete version. Abstract Nuclear power plays a pivotal role in sustainable electricity generation and global net zero emissions, contributing significantly to this secure pathway. Nuclear power capacity is expected to double, escalating from 413 gigawatts (GW) in early 2022 to 812 GW by 2050 within the net zero emissions (NZE) paradigm. The global energy landscape is undergoing significant transformation as nations strive to transition to more sustainable energy systems. Amidst this shift, nuclear power has emerged as a crucial component in the pursuit of a sustainable energy transition. This study examines nuclear power's multifaceted role in shaping sustainable energy transition. It delves into nuclear energy's contributions toward decarbonization efforts, highlighting its capacity to provide low-carbon electricity and its potential role in mitigating climate change. Furthermore, the study explores the challenges and opportunities associated with integrating nuclear power into energy transition strategies, addressing issues such as safety, waste management, and public perception. In conclusion, the global nuclear power capacity is anticipated to reach approximately 530 GW by 2050, representing a substantial shortfall of 35% compared with the trajectory outlined in the NZE pathway. Under the NZE scenario, nuclear power demonstrates exceptional expansion, nearly doubling from 413 GW in early 2022 to 812 GW by 2050. Concurrently, the trajectory highlights a transformative shift in renewable energy investments, with annual expenditures surging from an average of US$325 billion during 2016–2020 to an impressive US$1.3 trillion between 2031 and 2035. These projections underscore the critical role of nuclear and renewable energy investments in achieving global sustainability and emission reduction goals. Introduction Global warming and greenhouse gas emissions pose some of the most pressing challenges of the 21st century. The combustion of fossil fuels for electricity generation is a major contributor to these issues, releasing billions of tons of carbon dioxide (CO2) into the atmosphere annually (Abbasi et al., 2020; Nassar et al., 2024; Rekik and El Alimi, 2024a). In this context, nuclear energy emerges as a critical component of the solution. Unlike fossil fuels, nuclear power generates electricity with minimal greenhouse gas emissions, offering a reliable and scalable alternative to bridge the gap between energy demand and decarbonization goals. It operates independently of weather conditions, providing consistent energy output and complementing the intermittency of renewable sources like wind and solar (Rekik and El Alimi, 2024b, 2024c). Furthermore, advancements in nuclear technologies, including small modular reactors (SMRs) and generation IV reactors, have addressed historical concerns related to safety, waste management, and cost-effectiveness (Lau and Tsai, 2023). In 2022, global investment in low-emission fuels will maintain a robust growth trajectory, reaching a sum of US$13 billion. A significant portion of this investment was allocated toward liquid biofuels, totaling US$9.4 billion, and biogas, amounting to US$2.7 billion. It is important to emphasize that liquid biofuels constituted approximately 80% of the overall investment surge observed in 2022, with investments in biogas contributing 4% of the total. The residual portion of the investment was directed toward low-emission hydrogen production, which attained a sum of US$1.2 billion in 2022, representing an almost fourfold increase compared to the figures recorded in 2021 (Khaleel et al., 2024).Nuclear power is a pivotal component of low-carbon energy, which significantly contributes to the realization of a low-carbon economy and establishment of a green energy grid (Arvanitidis et al., 2023; El Hafdaoui et al., 2024; Fragkos et al., 2021). According to current data, 442 nuclear power reactors are operational worldwide, collectively generating 393 gigawatts (GW) of electricity, thereby furnishing a consistent and dependable source of low-carbon power (Mathew, 2022). Nuclear electricity constitutes approximately 11% of the total global electricity generation, representing a substantial portion of the global low-carbon electricity production (Alam et al., 2019). Recent advancements have enhanced the affordability and appeal of nuclear power as an alternative source of energy. These advancements encompass progress in large reactor technologies, the emergence of novel approaches such as advanced fuel utilization and SMRs, engineering breakthroughs facilitating the extension of operational lifespans for existing reactors, and innovations in materials science and improved waste management practices (Kröger et al., 2020; Zhan et al., 2021). Fast breeder reactor technology has transitioned into a commercial realm, offering benefits beyond electricity generation by enabling the production of surplus fuel and enhancing the efficiency of nuclear waste incineration, surpassing the capabilities of existing commercial reactor technologies (Lau and Tsai, 2023). Nuclear power plays a substantial role within a secure global trajectory toward achieving net zero emissions (NZE) (Addo et al., 2023; Dafnomilis et al., 2023). Nuclear power capacity experiences a twofold increase, progressing from 413 GW at the outset of 2022 to 812 GW by 2050 within the NZE paradigm. It is apparent that the annual additions to nuclear capacity peaked at 27 GW per year during the 2030s, surpassing the levels observed in the preceding decade. Despite these advancements, the global proportion of nuclear power within the overall electricity generation portfolio has experienced a marginal decline, settling at 8% (Murphy et al., 2023; Ruhnau et al., 2023). Emerging and developing economies (EMDEs) substantially dominate global growth, constituting over 90% of the aggregate, with China poised to ascend as a preeminent nuclear power producer prior to 2030. Concurrently, advanced economies collectively witness a 10% augmentation in nuclear power capacity as retirements are counterbalanced by the commissioning of new facilities, predominantly observed in nations such as the United States, France, the United Kingdom, and Canada (Bórawski et al., 2024). Furthermore, annual global investment in nuclear power has experienced a notable escalation, soaring from US$30 billion throughout the 2010s to surpass US$100 billion by 2030, maintaining a robust trajectory above US$80 billion by 2050 (IEA, 2022). In 2022, global nuclear power capacity experienced a modest increase of approximately 1.5 GW, reflecting a marginal year-on-year growth of 0.3%. This expansion was primarily driven by new capacity additions that surpassed the retirement of an over 6 GW of existing capacity (Fernández-Arias et al., 2023; Mendelevitch et al., 2018). EMDEs accounted for approximately 60% of the new capacity additions, underscoring their increasing significance in the global nuclear energy landscape. Conversely, more than half of the retirements were observed in advanced economies, including Belgium, the United Kingdom, and the United States. Table 1 shows the nuclear power capacity by region in the NZE from 2018 to 2030.   In alignment with the Net Zero Scenario, it is imperative for the global nuclear capacity to undergo an expansion averaging approximately 15 GW per annum, constituting a growth rate slightly exceeding 3% annually, until 2030. This strategic augmentation is crucial for sustaining the contribution of the nuclear sector to electricity generation, maintaining its share at approximately 10% (Liu et al., 2023). Such an expansion necessitates concerted efforts in both advanced economies and EMDEs. Furthermore, prioritizing the extension of operational lifetimes of existing nuclear facilities within G7 member states would not only fortify the existing low-emission infrastructure, but also facilitate the integration of new nuclear capacity, thereby augmenting the overall nuclear energy portfolio. [...] The significant contribution of nuclear power to sustainable energy transitions is underscored by its multifaceted role in addressing the pressing challenges of climate change and energy security (Asif et al., 2024). As nations worldwide endeavor to shift toward greener energy systems, nuclear power has emerged as a critical pillar of the decarbonization journey. Its ability to provide low-carbon electricity, mitigate climate change impacts by 2050, and enhance energy security highlights its pivotal importance in the broader context of sustainable energy transitions (Bhattacharyya et al., 2023; NEA, 2015). Thus, to fully realize its potential, challenges such as safety, waste management, and public perception must be addressed effectively. By leveraging robust policy frameworks, technological advancements, and international collaboration, nuclear power is poised to play a vital role in shaping the future of sustainable energy transitions on a global scale. Furthermore, the dynamic landscape of nuclear power development is evident in the significant influence exerted by EMDEs, particularly China, which is expected to emerge as a leading nuclear power producer by 2030 (Fälth et al., 2021; Nkosi and Dikgang, 2021). Concurrently, advanced economies are witnessing notable expansions in nuclear power capacity driven by the commissioning of new facilities to offset retirements (Budnitz et al., 2018). This trend is further reinforced by a notable surge in annual global investment in nuclear power, underscoring the sustained commitment to nuclear energy's pivotal role in sustainable energy transitions in the foreseeable future (IEA, 2019). The primary objective of this article is to explore the strategic role of nuclear power in advancing global sustainability goals and achieving zero emissions. The objective is structured around the following key agendas: •Nuclear power: prominence and green electricity source•Nuclear's role in achieving net zero by 2050•Nuclear power's significance in power system adequacySpecific technologies for sustainability in nuclear energy production•Investment in nuclear power•Addressing policy implications This comprehensive analysis aims to provide actionable insights into harnessing nuclear power for sustainable electricity generation and its pivotal role in achieving global zero-emission targets. Data and methodology This article conducts an in-depth analysis of the role of nuclear power in achieving sustainable electricity generation and supporting NZE targets. The article also addresses the potential of nuclear energy as a prominent and environmentally favorable electricity source, examining nuclear power's contribution toward the net zero by 2050 goal, its critical importance in ensuring power system adequacy, investment imperatives, and the broader policy implications.  [...] Nuclear power: prominence and green electricity source In 2020, nuclear power will constitute approximately 10% of the global electricity generation portfolio. This proportion, which had previously stood at 18% during the late 1990s, has experienced a decline; nonetheless, nuclear energy retains its status as the second-largest provider of low-emission electricity, trailing only hydroelectricity, and serves as the primary source within advanced economies. Despite the substantial proliferation of wind and solar PV technologies, nuclear electricity production in 2020 surpassed the aggregate output of these renewable sources. As of 2021, the global cumulative installed nuclear capacity has reached 413 GW, with 270 GW of this total being installed in advanced economies (Guidi et al., 2023; Halkos and Zisiadou, 2023; Pan et al., 2023; Zhang et al., 2022). Nuclear power generation during this period amounted to 2653 TWh, positioning it as the second largest source of electricity generation after hydropower, which generated 4275 TWh, as depicted in Figure 1.   In addition to its significant role in power generation, nuclear energy plays a crucial role in mitigating carbon dioxide (CO2) emissions. Since the 1970s, nuclear power has helped avoid the global release of approximately 66 gigatons (Gt) of CO2 globally, as shown in Figure 2.   Without the contribution of nuclear power, cumulative emissions from electricity generation would have increased by approximately 20%, whereas total energy-related emissions would have increased by 6% over this period (Wagner, 2021). Advanced economies accounted for more than 85% of these avoided emissions, with the European Union accounting for 20 Gt and the United States for 24 Gt, representing over 40% and 25% of total electricity generation emissions, respectively. In the absence of nuclear power, Japan would have experienced an estimated 25% increase in emissions from electricity generation, whereas Korea and Canada would have seen an increase of approximately 50%. Nuclear's role in achieving net zero by 2050 Nuclear energy has emerged as a pivotal low-emission technology within the trajectory toward achieving NZE (Pioro et al., 2019). In addition, it serves as a complementary force, bolstering the accelerated expansion of renewables, thereby facilitating the reduction of emissions from the global electricity sector to net zero by 2040 (Krūmiņš and Kļaviņš, 2023; Islam et al., 2024). Beyond its intrinsic contribution to fostering a low-emission electricity supply, nuclear power is significant as a dispatchable generating asset, fortifying supply security through its provision of system adequacy and flexibility. Furthermore, it is instrumental in furnishing heat for district heating networks and in selecting industrial facilities. Despite this, the prospective role of nuclear energy hinges significantly on the deliberations and determinations of policymakers and industry stakeholders concerning the pace of new reactor construction initiatives and the continued operational lifespan of existing nuclear facilities (Li et al., 2016; Li et al., 2015).In terms of the NZE trajectory, the global nuclear power capacity exhibits a remarkable surge, nearly doubling from 413 GW at the onset of 2022 to 812 GW by 2050 (Price et al., 2023; Utami et al., 2022). This augmentation primarily stems from the vigorous initiation of new construction endeavors, which effectively counterbalance the gradual decommissioning of numerous extant plants. Such an escalation constitutes a pronounced acceleration in comparison to the preceding three decades, characterized by a mere 15% increment in capacity, equivalent to approximately 60 GW (Haneklaus et al., 2023; Obekpa and Alola, 2023; Sadiq et al., 2023). Figure 3 demonstrates the nuclear power capacity within each country/region under the NZE by 2050 scenario.   The expected growth in nuclear power capacity far exceeds the path outlined by the current policies and legal frameworks. According to the Stated Policies Scenario (STEPS), the nuclear capacity is projected to reach approximately 530 GW by 2050, which is 35% lower than that of the NZE pathway (Espín et al., 2023; Nicolau et al., 2023; Nnabuife et al., 2023; Wang et al., 2023). Without a significant shift from recent nuclear power development trends, achieving NZE would require a limited reliance on a smaller range of low-emission technologies. This could compromise energy security and lead to higher total investment costs, resulting in increased electricity prices for consumers. Table 2 shows the average annual capacity addition for global nuclear power in NZE from 1981 to 2030.   In 2022, the global deployment of new nuclear power capacity witnessed a notable upsurge, with 7.9 GW added, representing a substantial 40% increase compared to the preceding year (Ho et al., 2019). It is worth bearing in mind that China spearheaded this expansion by completing the construction of two reactors, maintaining its streak for consecutive years as the leading contributor to global nuclear power capacity augmentation. It is noteworthy that the projects were successfully completed in various other nations, including Finland, Korea, Pakistan, and the United Arab Emirates. Additionally, significant strides were made in the initiation of new construction endeavors, with the commencement of construction activities on five reactors in China, two reactors in Egypt, and one reactor in Turkey (Hickey et al., 2021). Nuclear power's significance in power system adequacy Nuclear power facilities have persistently underpinned the dependability of power systems, thereby bolstering the adequacy of the system. Across diverse national contexts, nuclear power plants have historically maintained operational readiness, manifesting availability rates consistently exceeding 90%, thereby demonstrating their reliability in power generation. Given that a substantial proportion of nuclear power capacity directly contributes to system adequacy metrics, its significance in fortifying system reliability and adequacy significantly outweighs its proportional contribution to the total power capacity (Orikpete and Ewim, 2024; Frilingou et al., 2023; Raj, 2023; Ragosa et al., 2024). The contribution of nuclear power to system adequacy is demonstrated by the consistent trajectory of its share within the aggregate dispatchable power capacity, hovering at around 8% between 2021 and 2050 within the NZE framework (IEA, 2022; OIES, 2024). Dispatchable electricity sources have historically constituted the primary mechanism for ensuring system adequacy, a trend that endures within the NZE paradigm, especially as electricity systems undergo evolution marked by an escalating reliance on variable solar photovoltaic (PV) and wind energy sources (Marzouk, 2024; Moon et al., 2024; Wisnubroto et al., 2023). It is indisputable that unabated fossil fuel resources predominantly dominate dispatchable capacity; however, their prominence clearly diminishes, declining by a quarter by 2030 within the NZE framework and experiencing a precipitous decline thereafter. Unabated coal-fired power, currently the most substantial dispatchable source, anticipates a decline exceeding 40% in operational capacity by 2030 and approaches a state of negligible contribution by the early 2040s. Conversely, the unabated natural gas-fired power capacity exhibits a sustained level of stability until 2030, primarily driven by the necessity to offset the diminishing role of coal; nonetheless, it subsequently undergoes a rapid descent throughout the 2030s. Oil, constituting a comparatively minor contributor, experiences rapid phasing out across most regions, except for remote locales, within the delineated scenario (Makarov et al., 2023; Ren et al., 2024). Figure 4 highlights the global capacity of dispatchable power categorized by category in the scenario of achieving NZE by 2050.   In this context, fossil fuels equipped with Carbon Capture, Utilization, and Storage (CCUS) technology have emerged as notable contributors to bolstering system adequacy. Yet, nuclear power remains a steady contributor to the power system flexibility. In advanced economies, the proportion of hour-to-hour flexibility is projected to increase from approximately 2% to 5% by 2050. Similarly, in EMDEs, this ratio is anticipated to increase from 1% to 3% over the same temporal span (Jenkins et al., 2018). It is worth highlighting that in France, where nuclear power fulfills the lion's share of electricity generation requisites, flexibility has been ingrained within reactor designs (Ho et al., 2019). This feature enables certain plants to swiftly modulate their output to align with the fluctuating electricity supply and demand, operating in a load-following mode (Chen, 2024; Jin and Bae, 2023; Kanugrahan and Hakam, 2023). Although many nations have not habitually engaged nuclear power in such operational dynamics, a considerable number of reactors are capable of performing load-following operations with minimal or no requisite technical adaptations (Caciuffo et al., 2020). Figure 5 demonstrates the hour-to-hour power system flexibility based on the source and regional grouping in the NZE by the 2050 scenario.   Innovation holds promise in enhancing the flexibility of nuclear power. Advanced technological advancements, such as SMRs, can facilitate nuclear reactors to adjust their electricity output with greater ease, as illustrated in Figure 6 (Ho et al., 2019; Lee, 2024; Wisnubroto et al., 2023). Moreover, these technologies offer the prospect of enabling reactors to transition toward generating heat or producing hydrogen either independently or concurrently with electricity generation. Initiatives are underway to disseminate information to policymakers and planners regarding the potential cost advantages associated with enhancing nuclear power flexibility.  Figure 6 demonstrates the nuclear system augmented by wind turbines for trigeneration.   Investment in nuclear power The renaissance of nuclear power within the NZE trajectory necessitates a substantial surge in investment in the coming decades. This surge is envisaged to encompass the construction of new nuclear reactors and extension of operational lifespans for existing facilities. Within this scenario, annual global investment in nuclear power is poised to escalate to exceed US$100 billion during the initial half of the 2030s within the NZE framework, surpassing the threefold average investment level of US$30 billion recorded during the 2010s (IEA, 2022). Subsequently, investment levels are expected to gradually decline as the imperative for dispatchable low emissions generating capacity diminishes, tapering to approximately US$70 billion by the latter half of the 2040s (Kharitonov and Semenova, 2023; Zimmermann and Keles, 2023). Over the period spanning from 2021 to 2050, the allocation of investment toward nuclear power constitutes a fraction representing less than 10% of the aggregate investment dedicated to low-emission sources of electricity (IEA, 2022). By comparison, within this framework, the annual investment in renewable energy experiences a notable escalation, escalating from an average of US$325 billion during the interval from 2016 to 2020 to US$1.3 trillion during the period 2031–2035 (EEDP, 2023; Rekik and El Alimi, 2024d). It is worth noting that the latter consideration elucidates the rationale behind the disproportionate allocation of investment toward advanced economies in later decades. China, for instance, requires an annual expenditure averaging close to US$20 billion on nuclear infrastructure by 2050, representing a nearly twofold increase compared to the average observed during the 2010s (Aghahosseini et al., 2023; Vujić et al., 2012). Conversely, other EMDEs witness a tripling of investment, reaching approximately US$25 billion per year, on average. In contrast to advanced economies, the imperative for investment in these nations is more pronounced in the period leading up to 2035 (Bhattacharyya et al., 2023; Khaleel et al., 2024). Thus, nuclear energy, despite its advantages as a low-carbon energy source, faces notable challenges. High capital costs and long deployment timelines, driven by complex construction and regulatory requirements, often hinder its adoption. The management of radioactive waste remains a costly and contentious issue, while safety concerns, shaped by historical incidents, continue to influence public perception. Additionally, reliance on uranium, with its geographically concentrated supply, raises geopolitical and environmental concerns. Nuclear power also competes with the rapidly advancing and cost-effective renewable energy sector, while decommissioning aging plants poses long-term financial and logistical burdens. Addressing these limitations through advanced technologies, public engagement, and international collaboration is crucial for enhancing nuclear energy's role in sustainable energy transitions. Technologies for sustainability in nuclear energy production The pursuit of sustainability in nuclear energy production has been supported by advancements in innovative technologies that enhance efficiency, safety, and environmental compatibility (Aktekin et al., 2024; Ali et al., 2024; Zheng et al., 2024; Khan et al., 2017). These technologies are crucial for positioning nuclear power as a key contributor to clean and sustainable energy transitions. Below are some of the most impactful technologies in this domain: Advanced nuclear reactors: Small modular reactors (SMRs): SMRs are compact, scalable, and safer than traditional large-scale reactors. Their modular design allows for deployment in remote locations, making them suitable for decentralized energy systems. Generation IV reactors: These reactors incorporate advanced cooling systems and fuel cycles to improve efficiency, safety, and waste reduction. Examples include sodium-cooled fast reactors and gas-cooled fast reactors. Thorium-based reactors: Thorium fuel cycle reactors use thorium-232 as an alternative to uranium, offering a more abundant and sustainable fuel source. Thorium reactors produce less nuclear waste and have a lower risk of proliferation. Fusion energy: Although still in the experimental stage, nuclear fusion promises to be a game-changing technology. Fusion produces minimal radioactive waste and harnesses abundant fuel sources like deuterium and tritium, making it a virtually limitless and clean energy solution. Molten salt reactors (MSRs): MSRs use liquid fuels or coolants, such as molten salts, which operate at lower pressures and higher temperatures. These reactors are inherently safer and have the capability to utilize a variety of fuel types, including spent nuclear fuel and thorium. Reactor safety enhancements: Passive safety systems: These systems enhance reactor safety by using natural forces like gravity, natural convection, or condensation to cool the reactor core without human intervention. Digital twin technologies: Digital simulations and monitoring of reactor systems allow for predictive maintenance and real-time safety management. Nuclear waste management technologies Fast reactors: These reactors can recycle spent fuel, reducing the volume and radioactivity of nuclear waste. Deep geological repositories: Advances in geotechnical engineering have improved the safety of long-term waste storage in deep geological formations. Hybrid nuclear-renewable systems: Combining nuclear power with renewable energy sources like wind and solar can optimize energy production and grid stability. Hybrid systems leverage the reliability of nuclear energy with the intermittency of renewables for a balanced, low-carbon energy mix. Artificial intelligence (AI) and machine learning: AI and machine learning technologies are being deployed to enhance reactor performance, optimize fuel usage, and improve operational safety. Predictive analytics also play a critical role in maintenance and risk assessment. Fuel advancements: High-assay low-enriched uranium (HALEU): HALEU fuels enable reactors to operate more efficiently and reduce waste. Accident-tolerant fuels (ATFs): These are designed to withstand extreme conditions, reducing the likelihood of core damage during accidents. Integrated energy systems: Nuclear reactors are increasingly being used for purposes beyond electricity generation, such as hydrogen production, district heating, and desalination. The integration of digital technologies, including AI and machine learning, coupled with fuel advancements like HALEU and accident-tolerant fuels, highlights the continuous evolution of the nuclear sector. These innovations not only enhance efficiency and safety but also expand the applications of nuclear energy beyond electricity generation to include hydrogen production, desalination, and district heating. Despite these technological advancements, the sustainable deployment of nuclear energy requires robust policy frameworks, increased investments, and public acceptance. Addressing these challenges is critical to unlocking the full potential of nuclear power in achieving global energy security and NZE by 2050. [...] Discussion and policy implications Nuclear power presents a compelling case as a sustainable energy source owing to its several key advantages. Its high-energy density allows for substantial electricity generation from minimal fuel, enabling continuous operation, unlike intermittent renewables, such as solar and wind (Rekik and El Alimi, 2023a, 2023b), thus contributing significantly to grid stability (Cramer et al., 2023). Furthermore, nuclear power is a crucial tool for emissions reduction, boasting virtually no greenhouse gas emissions during operation. Although lifecycle emissions associated with fuel processing and plant construction exist, they remain comparable to or lower than those of renewables. Several studies have reported on the energy production capabilities of nuclear power and its contribution to reducing greenhouse gas emissions compared to other energy sources. A key aspect of these analyses is quantifying the potential contribution of nuclear power to reducing greenhouse gas emissions and achieving net zero targets. However, direct comparison of reported data can be challenging due to variations in model assumptions, geographic scope, and time horizons.  [...] From another perspective, radioactive waste generation poses a significant challenge to nuclear power because of its long-term hazardous nature. This necessitates meticulous management and disposal strategies to mitigate potential social impacts. These impacts arise from perceived or actual risks to human health and the environment, fueling public anxiety and opposition to nuclear power, which is often expressed through protests and legal action (Kyne and Bolin, 2016; Nilsuwankosit, 2017; Ram Mohan and Namboodhiry, 2020). Additionally, communities near waste sites can experience stigmatization, resulting in decreased property values and social isolation. The persistent nature of radioactive waste also raises intergenerational equity issues, burdening future generations with its management (Deng et al., 2020; Mason-Renton and Luginaah, 2019). Thus, transparent communication and stakeholder engagement are crucial for building public trust and ensuring responsible radioactive waste management (Dungan et al., 2021; Sančanin and Penjišević, 2023). There are various radioactive waste disposal pathways, each with unique social and technical considerations. Deep geological disposal, an internationally favored method for high-level waste disposal, involves burying waste deep underground for long-term isolation. Interim storage provides a secure temporary holding until a permanent solution is obtained (Chapman, 1992; Grambow, 2022). Reprocessing spent nuclear fuel recovers reusable materials, reducing high-level waste but creating lower-level waste. Advanced reactor technologies aim to minimize waste and improve safety, potentially converting long-lived isotopes into shorter-lived isotopes (Dixon et al., 2020; Englert and Pistner, 2023). Choosing a disposal pathway requires careful evaluation of factors, such as waste type and volume, geology, feasibility, cost, and public acceptance, often leading to a combined approach. Ongoing community engagement and addressing concerns are essential to safe and responsible waste management. Effective management and disposal of this waste require advanced technological solutions, robust regulatory frameworks, and long-term planning to ensure safety and sustainability (Abdelsalam et al., 2024; Rekik and El Alimi, 2024a), Moreover, its relatively small land footprint compared to other energy sources, especially solar and wind farms, minimizes the ecosystem impact and makes it a sustainable option in densely populated areas (Poinssot et al., 2016; Sadiq et al., 2022). Nuclear power also enhances energy security by reducing reliance on fossil fuels, which is particularly valuable in countries with limited domestic resources (Cramer et al., 2023; Ichord Jr., 2022). Additionally, nuclear power exhibits synergy with other clean technologies, providing a stable baseload complementing variable renewables and facilitating hydrogen production for diverse energy applications (Abdelsalam et al., 2024; El-Emam and Subki, 2021; Salam and Khan, 2018; Rekik, 2024; Rekik and El Alimi, 2024e). Finally, ongoing advancements in reactor design, such as SMRs, promise enhanced safety, reduced costs, and greater deployment flexibility, further solidifying the role of nuclear power in decarbonizing the electricity sector (Aunedi et al., 2023). Supportive policies and international cooperation are essential for fully realizing the potential of nuclear energy. Streamlined licensing and regulatory frameworks are crucial for reducing deployment time and costs and ensuring that safety standards are met efficiently (Gungor and Sari, 2022; Jewell et al., 2019). Furthermore, incentivizing investments through financial tools such as tax credits and loan guarantees can attract private capital and create a level-playing field for nuclear power (Decker and Rauhut, 2021; Nian and Hari, 2017; Zimmermann and Keles, 2023). Addressing public perception through education and engagement is equally important for building trust and acceptance. Moreover, international cooperation is vital in several respects. The disposal of radioactive waste remains a complex issue, requiring careful long-term management and securing geological repositories to prevent environmental contamination owing to the long half-life of some isotopes. Furthermore, while modern reactors incorporate advanced safety features, the potential for accidents such as Chernobyl and Fukushima remains a concern because of the potential for widespread radiation release and long-term health consequences (Denning and Mubayi, 2016; Högberg, 2013; Wheatley et al., 2016). Moreover, the high initial costs associated with design, construction, and licensing present significant barriers to new nuclear projects, particularly in developing countries. In addition, the risk of nuclear proliferation, in which technology intended for peaceful energy production is diverted for weapons development, necessitates stringent international safeguards, as highlighted by following reference. Public perception also plays a crucial role because negative opinions and concerns about safety and waste disposal can create opposition to new projects. Finally, the decommissioning of nuclear plants at the end of their operational life is a complex and costly process that requires substantial resources and expertise to dismantle reactors and manage radioactive materials. [...] Conclusion The role of nuclear power in sustainable energy transition is multifaceted and significant. As nations worldwide strive to transition toward more environmentally friendly energy systems, nuclear power has emerged as a crucial component of the decarbonization journey. Its capacity to provide low-carbon electricity, mitigate climate change, and contribute to energy security underscores its importance in the broader context of sustainable energy transitions. Despite this, challenges such as safety, waste management, and public perception must be addressed to fully harness the potential of nuclear power to achieve sustainability goals. By leveraging policy frameworks, technological innovations, and international cooperation, nuclear power can play a vital role in shaping the future of sustainable energy transition on a global scale. In this context, EMDEs exert a substantial influence on global growth, collectively accounting for over 90% of the aggregate, with China positioned to emerge as the foremost nuclear power producer before 2030. Concurrently, advanced economies have witnessed a notable 10% increase in their nuclear power capacity. This augmentation is attributed to the commissioning of new facilities, which offset retirements, manifestly observed in nations such as the United States, France, the United Kingdom, and Canada. Furthermore, there is a marked escalation in annual global investment in nuclear power, surging from US$30 billion throughout the 2010s to surpass US$100 billion by 2030. This upward trajectory is robustly sustained, remaining above US$80 billion by 2050. In conclusion, the remarkable decline in the levelized cost of electricity (LCOE) for solar PV and wind power over the past decade has positioned renewable energy as a cost-competitive and viable alternative to fossil fuels in many regions. The over 80% reduction in LCOE for utility-scale solar PV from 2010 to 2022 exemplifies the economic feasibility of renewables. Concurrently, the steady growth in renewable energy capacity, spearheaded by solar and wind energy, underscores their critical role in the global energy transition. With renewable electricity capacity surpassing 3300 GW in 2023 and accounting for over one-third of the global power mix, renewable energy is undeniably at the forefront of efforts to achieve a sustainable, low-carbon energy future. Declaration of conflicting interestsThe authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.FundingThe authors received no financial support for the research, authorship, and/or publication of this article.ORCID iDSassi Rekik https://orcid.org/0000-0001-5224-4152Supplemental materialSupplemental material for this article is available online.ReferencesAbbasi K, Jiao Z, Shahbaz M, et al. (2020) Asymmetric impact of renewable and non-renewable energy on economic growth in Pakistan: New evidence from a nonlinear analysis. Energy Exploration & Exploitation 38(5): 1946–1967. Crossref. Web of Science.Abdelsalam E, Almomani F, Azzam A, et al. 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Abstract Globalization has posed significant challenges for Latin American countries, prompting them to rethink their economic integration models. Mercosur and the Pacific Alliance, the two main regional blocs, have faced processes of economic and political convergence, albeit with different approaches: Mercosur, oriented towards protectionism, and the Pacific Alliance, which is committed to trade liberalization. In this context, the European Union emerges as a key player with which both blocs have sought to strengthen their economic relations, through strategic agreements such as the one signed in 2019, the Mercosur-EU free trade agreement. The article examines the dynamics of economic integration in Latin America, analyzing the structural divergences between the blocs and their capacity to face global challenges. In particular, it delves into the implications of the Mercosur-EU agreement, with special attention to economic impacts, sectoral cooperation opportunities and environmental challenges. The research also includes a case study on the implementation of the agreement and future prospects, complemented by an interview with the Consul of Uruguay to analyze the diplomatic position and prospects for the development of relations between Latin America and the European Union. The objective of this work is to explore how economic integration models can contribute to face global challenges, promote sustainable development and strengthen Latin America's competitiveness in the global scenario Introduction Global Context of Cooperation Between the European Union and Latin America Future cooperation between the European Union (EU) and the main Latin American trade blocs — Mercosur and the Pacific Alliance — is expected to focus on key areas such as sustainability, digitalization, and technological innovation. These sectors are essential for modernizing the involved economies and building a long-term partnership capable of addressing the economic, environmental, and geopolitical challenges of today’s global landscape. One of the main opportunities for cooperation lies in the circular economy. The EU promotes sustainable production and consumption models that aim to reduce waste and optimize resources. This approach paves the way for close collaboration with Latin American countries in waste management and reducing the environmental impact of industrial activities. The potential economic and labor impacts of this collaboration are significant, as it could create new opportunities for innovation and development in strategic sectors. At the same time, digitalization is emerging as a key pillar for the economic transformation of both regions. The EU’s Digital Alliance, for example, aims to strengthen Latin American economies by promoting connectivity, the development of digital skills, and the creation of new technological ecosystems. This effort also includes social inclusion initiatives, targeting vulnerable sectors such as informal workers and the elderly population, to reduce the digital divide and foster social inclusion. Another area of cooperation is maritime transport. The EU intends to invest in advanced and sustainable port infrastructure to improve operational efficiency and reduce the environmental impact of port activities. This initiative aligns with global sustainability goals and the EU’s broader strategy to promote environmentally responsible trade practices. However, cooperation between the EU and Latin American trade blocs also faces challenges. While the Pacific Alliance appears more inclined toward adopting advanced technologies, Mercosur faces significant structural reforms to close the technological gap among its members. Despite these hurdles, the EU is committed to supporting both regions, strengthening its role as an economic and political partner, and promoting a development model that integrates sustainability and inclusiveness. In this context, digitalization, economic modernization, and infrastructure diversification emerge as key elements to address global challenges. These factors are essential for promoting fair and inclusive development in both regions, creating a favorable environment for innovation and sustainable economic growth. The European Union considers Latin America as a strategic partner not only because of its natural resources but also due to shared values, such as the fight against climate change. Within this framework, the EU’s Green Deal and the environmental diplomacy play a crucial role in supporting ecological transition in the region, with a particular focus on renewable energy, the protection of the Amazon, and sustainable agricultural practices. Nevertheless, challenges remain, including the strong influence of traditional economic sectors like agribusiness and limited institutional capacity in some countries. Despite these issues, the EU is working to encourage the adoption of strict environmental standards through investments in sustainable projects and clean technologies, helping to reduce deforestation and improve biodiversity. The cooperation with the Pacific Alliance is particularly strong due to the region’s openness to sustainability, whereas Mercosur faces internal obstacles such as regulatory fragmentation and coordination difficulties among its members. Still, the EU continues to support initiatives in renewable energy, energy efficiency, and the bioeconomy, creating important economic opportunities for the region. Rising geopolitical competition, especially with China and the United States, is pushing the EU to strengthen its ties with Latin America by backing initiatives like the Global Gateway, which aims to promote sustainable and transparent infrastructure. Programs like “Horizon Europe” support scientific development in the region, while initiatives such as Erasmus+ encourage cultural exchange and the training of a new generation of professionals. The EU stands out for its integrated approach, aiming to promote a development model that combines economic growth, social inclusion, and environmental protection—seeking to overcome political and economic barriers and foster effective and mutually beneficial cooperation between the two regions. The main challenge remains translating these ambitions into concrete actions. The adoption of shared standards and the reduction of non-tariff barriers will be key elements in achieving fruitful cooperation. Despite the difficulties, EU–Latin America cooperation has the potential to lead the future toward sustainable and inclusive development, with positive effects on global policy, the ecological transition, and international trade. Methodology The methodology used in the preparation of this article combined extensive documentary research with the collection of primary data through direct interviews. First, documentary research served as the main foundation for analyzing the issues discussed, such as the environmental impacts and diplomatic challenges related to the Association Agreement between the European Union and Mercosur. To that end, official sources were consulted, including documents from the European Commission and reports from the European Parliament, which provide detailed data and analyses on the trade, environmental, and social aspects of the agreement. This phase of the research included a review of institutional reports, political resolutions, and other public documents available online, offering a comprehensive view of regulatory developments and the political positions adopted by European institutions and Mercosur countries. In addition to documentary research, a distinctive element of this work was an interview conducted with the General Consul of Uruguay in Spain, who provided a direct diplomatic perspective on the topic. The interview aimed to gather insights and information on the agreement negotiations from Mercosur’s point of view, exploring the political dynamics and diplomatic challenges associated with the understanding between the two blocs. The topics addressed during the interview focused on how Mercosur perceives the agreement in relation to its economic and environmental priorities, and on the measures being taken to balance development and sustainability within the framework of European policies. Finally, the research methodology was enhanced through the triangulation of information obtained by comparing data from official EU sources with the insights gathered from the interview. This approach enabled the development of a balanced and comprehensive view of the topics discussed. The combination of qualitative methods allowed for an in-depth analysis of the challenges and opportunities arising from the Mercosur–EU Agreement, as well as its social, economic, and environmental implications at the international level. Development Inside the Agreement The free trade agreement between Mercosur and the European Union, signed in 2019 after more than twenty years of negotiations, stands as one of the most ambitious examples of interregional cooperation. This treaty, which aims to create one of the largest free trade areas in the world, involves nearly 770 million people and accounts for around 25% of global Gross Domestic Product (GDP). The significance of the agreement is heightened by the current geopolitical context, marked by a rise in protectionist policies and the growing influence of China, making it crucial to strengthen ties between the two regional blocs (European Commission, 2019).   Trade relations across both sides of the Atlantic are substantial. In the previous year, European exports to the four Mercosur countries amounted to €55.7 billion, while imports of goods totaled €53.8 billion. The roots of cooperation between the European Union and Mercosur go back to the 1990s, when the EU initiated a structured dialogue with Mercosur aimed at promoting trade liberalization, political dialogue, and cooperation in various sectors. The agreement signed in 2019 can be interpreted as a strategic response to increasing global protectionist pressures. However, the ratification process has been hindered by political disagreements, economic asymmetries, and concerns over potential environmental impacts, such as deforestation and pesticide use (López, 2020). The agreement has received support from several EU countries, including Germany, Spain, and Portugal, while others — such as France, Poland, and Ireland — have opposed it due to fears related to unfair competition and food safety. Specifically, the treaty could lead to increased imports of meat and other agricultural products from Mercosur, which raises concern among EU agricultural sectors. At the same time, Mercosur views the agreement as an opportunity to strengthen its international competitiveness and reduce its economic dependence on China and the United States (Pereira, 2021). The path to ratification, still ongoing, requires a lengthy legal process involving approvals by various national parliaments. If ratified, the agreement will help reduce tariffs and simplify customs procedures, benefiting strategic sectors such as industry, chemicals, and pharmaceuticals. However, ongoing disagreements among the involved countries continue to cast uncertainty over the future of the initiative (European Commission, 2019). The future of the free trade agreement between the European Union and Mercosur stands at a critical crossroads, facing the risk of a complete breakdown in negotiations or, alternatively, a "no-deal" scenario. However, between these two extreme outcomes, there are several intermediate solutions, which could include modifications to the treaty’s controversial points or even the possibility of granting a new mandate to the European Commission to renegotiate the agreement — either partially or entirely. Such modifications could lead to significant delays in the progress already made (Brito, 2021). The Portuguese presidency of the EU Council, which began on January 1, 2025, now faces a particularly complex situation as it attempts to steer the process toward a positive conclusion. Portuguese Foreign Minister Augusto Santos Silva has expressed his intent to accelerate the ratification process and promote the agreement’s entry into force. However, resistance from France, which fears negative impacts on its agricultural and livestock sectors, remains a major obstacle. Protests by French farmers, including demonstrations and road blockades, highlight internal difficulties within the European Union (Müller, 2020). Despite this opposition, the European Commission — backed by countries like Spain and Germany — continues to push for the agreement’s ratification, highlighting the enormous economic benefits for both parties. It is estimated that the agreement could result in a €15 billion increase in GDP for the European Union and €11.4 billion for the Mercosur countries. Moreover, the elimination of customs tariffs would boost European exports, particularly in sectors such as wine, alcoholic beverages, and dairy products. For the European Union, the agreement represents not only a strategic opportunity to expand trade with South America but also a mean to strengthen its economic security amid an unstable geopolitical context (European Commission, 2021). The deal is expected to create new commercial and employment opportunities with a positive impact on both regions’ economies. Particularly, it could attract sustainable investment into Mercosur, especially in high-tech sectors. Additionally, it would support the strengthening of supply chains and enhance the EU’s economic resilience, reinforcing strategic cooperation between the two regional blocs.   However, the success of the agreement will depend on both parties’ ability to overcome existing differences, address environmental and human rights concerns, and implement effective monitoring mechanisms. On Mercosur’s side, it will be necessary to undertake economic reforms to enhance competitiveness, stimulate innovation, and attract foreign investment. Meanwhile, the European Union will face the challenge of gradually reducing agricultural subsidies to ensure fair competition (Pereira, 2021). In summary, the free trade agreement between the European Union and Mercosur represents a significant opportunity to strengthen economic cooperation between two blocs with complementary economies: the EU, a global leader in the industrial sector, and Mercosur, one of the main exporters of agricultural raw materials. The agreement aims to increase bilateral trade and direct investment, particularly in the agricultural and industrial sectors, with important implications for the future of interregional cooperation and global trade. The Association Agreement between the EU and Mercosur has raised serious concerns of both environmental and diplomatic nature. While designed to strengthen economic and political ties between the two blocs, the agreement could have devastating environmental impacts, especially considering Mercosur’s heavy reliance on agricultural exports to the EU. Brazil, the leading exporter of products like soy, beef, and coffee, stands as a clear example of these issues. The demand for these products is directly linked to deforestation, with severe consequences for vital ecosystems such as the Amazon. Although deforestation in Brazil decreased by 50% in 2023 compared to the previous year, future projections remain worrisome. The access to European markets, guaranteed by the agreement, could accelerate land conversion and intensify pressure on natural resources. Some studies estimate that the agreement could lead to the conversion of between 560 and 1,730 km² of land — an impact that, although lower than the 13,235 km² of annual deforestation recorded in the Brazilian Amazon in 2021, remains significant (FAO, 2021). A crucial chapter of the agreement is the “Trade and Sustainable Development Chapter” (TSDC), which promotes cooperation between the EU and Mercosur on environmental issues and establishes a commitment to adhere to international climate agreements, such as the Paris Agreement. However, criticism of the TSDC focuses on the lack of binding enforcement mechanisms for environmental regulations and the absence of adequate sanctions, which limits the agreement’s ability to ensure compliance with environmental commitments. Despite the creation of a joint committee to monitor the implementation of the TSDC, its effectiveness is weakened by the lack of concrete punitive tools (European Commission, 2020). The European Commission also highlights the value that Mercosur can bring in terms of agricultural and fishery products to the European market. Some of these goods — such as soy, cocoa, and coffee — are items that EU member states cannot produce or only produce in minimal quantities. Others, such as beef, poultry, honey, and cheese, compete directly with European agricultural businesses. This has fueled rural anger, particularly among French, Polish, and Italian farmers, who accuse the EU of promoting unfair competition, given that South American producers are not subject to the same regulations as their European counterparts. Concerns about increasing deforestation and the weakening of environmental and social standards are among the primary fears expressed by environmental groups and certain EU member states. During Jair Bolsonaro’s presidency (2019–2022), environmental policies were significantly rolled back, exacerbating these concerns. However, the election of Luiz Inácio Lula da Silva has raised new hopes for a renewed commitment to environmental protection, although economic priorities may complicate the negotiation process (Doyle, 2023). Despite the criticisms, the agreement presents an opportunity to promote the sustainable management of natural resources, enhance transparency in production chains, and strengthen the enforcement of environmental laws in Mercosur countries. To achieve a positive and lasting impact, however, concrete commitment from both governments and the private sector will be essential, supported by effective monitoring mechanisms and enforceable sanctions. An innovative aspect of the agreement is the inclusion of clauses that mandate the end of illegal deforestation by 2030, with a monitoring system designed to ensure compliance with these rules. Although this commitment represents an important step forward, doubts remain about its enforcement and effective oversight — particularly regarding Brazil’s compliance, given its central role in deforestation. Additionally, the agreement stipulates that only “deforestation-free” products — such as soy, beef, palm oil, and cocoa — will be allowed to enter the EU market (European Commission, 2022). Concerns related to food safety and public health are equally relevant. The importation of beef from countries where the use of antibiotics and hormones is less regulated could compromise food safety in Europe, as highlighted by an audit conducted by the European Commission. Some critics fear that the agreement may lower product quality standards and increase unfair competition for European farmers. Furthermore, there is concern that the deal could encourage industrial relocation to South America, resulting in job losses in Europe (OECD, 2021). Despite these challenges, the agreement represents a rare opportunity to strengthen interregional relations between the EU and Mercosur in the face of global challenges such as climate change and biodiversity protection. However, the success of the agreement will depend on the ability of both regions to effectively integrate economic interests with the need for social and environmental sustainability. It will be necessary to adopt strict measures to monitor the environmental and social impacts of the agreement, actively involve local communities in policymaking, and promote a development model that balances economic growth with sustainability. To further explore the issues affecting Mercosur and potential solutions for greater regional integration, we interviewed Ramiro Rodríguez Bausero, General Consul of Uruguay in Spain. During the conversation, Bausero shared his perspective on the economic and political challenges that face the bloc, as well as on the opportunities for cooperation with the Pacific Alliance and the policies needed to address emerging global problems such as climate change and food security. Below are some key excerpts from the interview, along with a commentary on how these insights contribute to a deeper understanding of the challenges and opportunities facing Mercosur in a global context. To better understand the issues influencing Mercosur, it is essential to examine the internal challenges and asymmetries among its members. According to Ramiro Rodríguez Bausero, General Consul of Uruguay in Spain, “Mercosur displays significant disparities in terms of size and level of development; there are evident inequalities between countries and regions, and these persist over time.” This observation highlights one of the core difficulties in achieving economic integration within the bloc: the economic disparities between its larger and smaller members. Resources and investments are unevenly distributed, and the inability to effectively manage these asymmetries hinders balanced growth, with larger countries often dominating the economic process. This concept is fundamental to understanding the structural limitations that constrain Mercosur’s development. Another crucial aspect is the influence of ideological orientation on the integration processes. Bausero notes that “within the bloc, different visions coexist, based on internal productive structures, and as governments change, their profiles evolve toward more or less protectionist/open policies, depending on the ideological orientation of each administration.” This phenomenon poses a major obstacle to strengthening Mercosur, as the swings between protectionist and open-market policies make it difficult to establish a coherent and long-term strategy. Ideological differences between governments further complicate the formation of a stable and strategic economic bloc. Nevertheless, despite internal challenges, there are significant opportunities for cooperation with other regional entities such as the Pacific Alliance. Bausero highlights that “strengthening ties between the two blocs presents several areas with the potential for cooperation, such as trade facilitation, reciprocal investment, physical integration, technological innovation, and the movement of people.” Although political divergences may hinder closer cooperation, these mutual areas of interest could reinforce regional integration, especially in fields like trade and technological innovation. On the environmental sustainability and climate change front, Bausero suggested that “Mercosur could implement more ambitious climate policies, promoting a transition to a low-carbon economy with measures that support renewable energy and encourage technological innovation in sustainable industries.” Adopting more advanced climate policies represents an opportunity for Mercosur to address global climate challenges. Given its significant influence over agricultural policies and natural resource management, the bloc could play a crucial role in driving the shift toward a green economy — responding to international pressure and improving its reputation as a responsible global actor. The trade potential of Mercosur, especially in the context of the agreement with the European Union, is another key issue. Bausero emphasized that “the benefits of the trade component of the Agreement show that many of the goods comprising Mercosur countries’ export offerings to the EU will receive preferential treatment in the European market.” This agreement could create new opportunities for economic growth among member countries, reducing their dependence on Asian markets — particularly China. However, internal challenges related to the agreement, especially concerning the agricultural sector, could hinder full implementation and require careful attention. Finally, reforming Mercosur has emerged as a relevant topic, with some countries, like Uruguay, advocating for a more flexible bloc. Bausero stated: “Some countries (such as Uruguay) have argued for the need to make the bloc more flexible, transforming it into a Free Trade Area (FTA), allowing each member to pursue its own international agenda, including negotiating agreements with third countries.” The proposal to transform Mercosur into a more flexible FTA reflects criticism of the bloc's rigidity. If implemented, such a reform could allow member states to adopt more individualized policies — but it also raises questions about the future of regional integration and the political and economic unity of the bloc. Another important area of development is digital cooperation and infrastructure. According to Bausero, “the so-called ‘Digital Mercosur’ is a cooperation project between the EU and Mercosur, aimed at reducing technological asymmetries and promoting common policies and strategies in the fields of the Information Society, e-commerce, and human resource training.” Digital cooperation could be one of the main drivers of growth for Mercosur, enabling member countries to overcome technological inequalities and access global markets. Digitalization and the integration of modern technologies are essential to enhancing regional competitiveness and developing an interconnected digital economy. Conclusions The free trade agreement between Mercosur and the European Union, signed in 2019, represents a significant step toward greater interregional economic integration, with the ambitious goal of creating one of the largest free trade areas in the world. However, its future remains uncertain and depends on a series of interrelated factors, including internal political divergences within the EU, environmental challenges, and economic inequalities among Mercosur members. These elements raise numerous questions and opportunities for critical reflection that could be explored in future research. First and foremost, one of the main issues to address is the environmental impact of the treaty. The "Trade and Sustainable Development Chapter" (TSDC), while establishing a commitment to international climate agreements, does not provide sufficiently binding mechanisms to ensure effective environmental protection. What is the role of trade policy in a context of growing urgency for environmental sustainability? To what extent can the current provisions halt deforestation and guarantee the sustainable use of natural resources, especially in countries like Brazil, where agricultural expansion is directly linked to ecosystem destruction? These questions could pave the way for deeper research into the monitoring and effectiveness of environmental policies within trade agreements. Another relevant issue is the question of economic asymmetries within Mercosur. The disparities among member countries, in terms of size and development level, pose a challenge to genuine economic integration. How can smaller Mercosur countries compete on equal footing with larger ones without compromising their competitiveness? Furthermore, how can it be ensured that the benefits of the agreement are more equitably distributed among the bloc's members? Answering these questions is crucial for implementing policies that promote balanced and inclusive development. The geopolitical context also plays a fundamental role. In a scenario where protectionist trends are on the rise and China's influence continues to grow, how might the agreement between the EU and Mercosur redefine trade and geopolitical relations between the two blocs? Could this agreement represent the beginning of a reorganization in global economic balances, reducing dependence on Asian markets and strengthening ties between Europe and Latin America? These questions invite a deeper analysis of the geopolitical implications of the treaty and its influence on global trade dynamics. Additionally, the proposal to reform Mercosur — advocating for greater flexibility by transforming it into a Free Trade Area (FTA) — raises important questions. How would such a reform affect the bloc’s political and economic cohesion? Would flexibility be the right approach to addressing internal differences, or could it instead lead to the fragmentation of Mercosur and undermine its ability to act as a unified player on the international stage? Finally, digital cooperation, particularly the "Digital Mercosur" project, could become one of the most promising areas of development. How could digitalization and technological cooperation between the EU and Mercosur help reduce technological disparities and promote the competitiveness of the Latin American bloc? Strengthening digital infrastructure could accelerate Mercosur’s economic growth and open new trade opportunities, but what political and technological challenges will arise in this digitalization process? In conclusion, the free trade agreement between the European Union and Mercosur represents a significant opportunity, but it also poses a range of challenges that require ongoing attention. The questions raised by this agreement— from environmental concerns and economic asymmetries to geopolitical dynamics and structural reforms within Mercosur — offer numerous starting points for future research. 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Universidad Autónoma de Madrid.Revista Política Internacional | Volumen VII Nro. 2 abril-junio de 2025. https://doi.org/10.5281/zenodo.15103813This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0). The opinions and contents of the published documents are solely the responsibility of their authors.

Economic relations between Russia and China remain high. Beijing has become Moscow's most important trading partner, and in the context of Western sanctions, it has also become an alternative source of industrial and consumer goods, as well as the largest market for Russian energy and other raw materials. At the same time, external political factors may have a growing influence on Russian-Chinese economic relations. These include the trade war between China and the United States, a possible escalation of US sanctions against Russia, and the expansion of secondary sanctions by the European Union against Chinese companies. The trade war, in the form of increased import duties on imported goods, has become one of the calling cards of Donald Trump's second term in office. The executive order he issued on April 2, 2025, provided a detailed conceptual justification for such a policy. The main goal is the reindustrialisation of the United States through the return or transfer of industrial production to the territory of the US, as well as an equalization of the trade balance with foreign countries. The basic part of Trump's order concerned all countries throughout the world and assumes a tariff increase of 10%. It goes on to determine individual duties on the goods of more than 70 countries, with its own sets for each. China became one of the few countries which decided to mirror the tariff increases. This led to a short-lived and explosive exchange of increases in duties. While it was suspended by negotiations between the two countries in Geneva, it was not removed from the agenda. In the US trade war “against the whole world”, China remains a key target. This is determined by the high level of the US trade deficit in relations with China, which has persisted for more than 40 years. Apparently, it remained comfortable for the US until China made a noticeable leap in the field of industrial and technological development. Such a leap allowed China to gradually overcome its peripheral place in the global economy, displace American and other foreign goods from the domestic market, and occupy niches in foreign markets. Despite the critically important role of American components, patents and technological solutions in a number of industries, China has managed to reduce its dependence on them. The growing industrial and technological power of the PRC is becoming a a political problem for the US. It was clearly identified during the first term of Trump's presidency. Even then, the US pursued a course toward the technological containment of China. Despite the temporary respite in the trade war, US pressure on China will remain. The tariff policy may be supplemented by restrictive new measures (sanctions) in the field of telecommunications and other industries. During the new term of Donald Trump's presidency, the politicisation of issues that the Biden administration avoided putting at the forefront of US-Chinese relations began again. These include the problem of Hong Kong autonomy and the issue of ethnic minorities in the Xinjiang Uyghur Autonomous Region of China. Both issues received a high level of politicisation during Trump's first term. The US-China trade war has so far had little effect on Russian-Chinese relations. The increase in US tariffs has had virtually no effect on Russia. Russia is already facing a significant number of restrictive measures, and the volume of trade with the United States has been reduced to near zero since the start of Moscow’s Special Military Operation in 2022. However, Russia may feel the effects of the trade war. For example, the United States may require China to purchase American energy resources as a measure to correct the trade balance. Obviously, such a measure is unlikely to solve the imbalance. However, it has the potential to affect the volume of Russian oil supplies to China in one way or another. In addition, the trade war as a whole may affect oil prices downwards, which is also disadvantageous for Russia. On the other hand, Russia is a reliable supplier of energy resources for China, which will not politicise them. Even in the context of new aggravations of the trade war, China is unlikely to refuse Russian supplies. Another factor is US sanctions against Russia. After the start of Russian-American negotiations on Ukraine in 2025, Washington avoided using new sanctions, although all previously adopted restrictive measures and their legal mechanisms are in force. However, Donald Trump failed to carry out a diplomatic blitzkrieg and achieve a quick settlement. The negotiations have dragged on and may continue for a long time. If they fail, the United States is ready to escalate sanctions again. Existing legal mechanisms allow, for example, for an increase in the list of blocked persons, including in relation to Chinese companies cooperating with Russia. This practice was widely used by the Biden administration. It was Chinese companies that became the key target of US secondary sanctions targeting Russia. They fell under blocking financial sanctions for deliveries of industrial goods, electronics and other equipment to Russia. However, there was not a single large company among them. We were talking about small manufacturing companies or intermediary firms. At the same time, the Biden administration managed to significantly complicate payments between Russia and China through the threat of secondary sanctions. US Presidential Executive Order 14114 of December 22, 2023 threatened blocking sanctions against foreign financial institutions carrying out transactions in favour of the Russian military-industrial complex. In practice, such sanctions against Chinese financial institutions were practically not applied, except for the blocking of several Chinese payment agents in January 2025. However, the very threat of secondary sanctions forced Chinese banks to exercise a high level of caution in transactions with Russia. This problem has not yet been fully resolved. New legal mechanisms in the field of sanctions, which are being worked on in the United States, may also affect Russian-Chinese relations. We are talking about the bill introduced by US Senator Lindsey Graham and several other senators and members of congress. Their bill assumes that in the event of failure of negotiations with Russia on Ukraine, the US executive branch will receive the authority to impose 500% duties on countries purchasing Russian raw materials, including oil. China may be among them. This threat should hardly be exaggerated for now. The passage of the bill is not predetermined. Even if it is signed into law, the application of 500% tariffs against China will be an extremely difficult matter. Recent rounds of the trade war have shown that China is ready for retaliatory measures. However, the emergence of such a norm will in any case increase the risks for business and may negatively affect Russian suppliers of raw materials. Another factor is EU sanctions policy. Unlike the US, the EU continues to escalate sanctions against Russia despite the negotiations on Ukraine. Brussels is expanding the practice of secondary sanctions, which also affect Chinese companies. In the context of a deepening economic partnership between China and the EU, this factor seems significant. However, in reality, it will play a peripheral role. The EU's practice of secondary sanctions is still significantly more limited than the American one. It does not affect any significant Chinese companies. Problems may be created by the expansion of EU bans on the provision of financial messaging services for Russian banks—this will affect their relations with Chinese counterparties. But such bans stimulate the acceleration of the use of the Chinese CIPS payment system by Russians, which has the functionality of transmitting financial messages. Compared to the US, the EU policy factor remains secondary. First published in the Valdai Discussion Club.

Abstract Climate change is considered to be one of the biggest problems acknowledged globally today. Therefore, the causes of climate change and solutions to this problem are frequently investigated. For this reason, the purpose of this study is to empirically examine whether the ‘Climate Change Performance Index’ (CCPI) is successful in increasing environmental investments for E-7 countries with the data for the period of 2008–2023. To achieve this aim, the Parks-Kmenta estimator was used as the econometric method in the study. The study findings provide strong evidence that increases in the climate change performance support environmental investments. High climate change performance directs governments and investors toward investing in this area; therefore, environmental investments tend to increase. The study also examined the effects of population growth, real GDP and inflation on environmental investments. Accordingly, it has been concluded that population growth and inflation negatively affect environmental investments, while GDP positively affects environmental investments. 1. Introduction There is a broad consensus that the main cause of climate change is human-based greenhouse gas emissions from non-renewable (i.e., fossil) fuels and improper land use. Accordingly, climate change may have serious negative consequences as well as significant macroeconomic outcomes. For example, an upward trend of temperatures, the rising sea levels, and extreme weather conditions can seriously disrupt the output and productivity (IMF, 2008a; Eyraud et al., 2013). Due to the global climate change, many countries today see environmental investments, especially renewable energy investments, as an important part of their growth strategies. Until recent years, the most important priority of many countries was an improvement in the economic growth figures. Still, the global climate change and the emergence of many related problems are now directing countries toward implementing policies which would be more sensitive to the environment and would ensure sustainable growth rather than just increase the growth figures. (Baştürk, 2024: 327). The orientation of various countries to these policies has led to an increase in environmental investments on a global scale. A relative rise of the share of environmental investments worldwide is not only a medium-term climate goal. It also brings many new concepts to the agenda, such as an increasing energy security, reduction of the negative impact of air pollution on health, and the possibility of finding new growth resources (Accenture, 2011; McKinsey, 2009; (OECD), 2011; PriceWaterhouseCoopers, 2008; Eyraud et al., 2013). Today, environmental investments have a significant share in energy and electricity production. According to the World Energy Outlook (2023), investments in environmentally friendly energies have increased by approximately 40% since 2020. The effort to reduce emissions is the key reason for this increase, but it is not the only reason. Economic reasons are also quite strong in preferring environmental energy technologies. For example, energy security is also fundamentally important in the increase in environmental investments. Especially in fuel-importing countries, industrial plans and the necessity to spread clean (i.e., renewable) energy jobs throughout the country are important factors (IEA WEO, 2023).  In economic literature, environmental investments are generally represented by renewable energy investments. Accordingly, Figure 1 below presents global renewable energy electricity production for 2000–2020. According to the data obtained from IRENA (2024) and Figure 1, the total electricity production has increased by approximately 2.4% since 2011, with renewable energy sources contributing 6.1% to this rate, while non-renewable energy sources contributed 1.3%. In 2022 alone, renewable electricity grew by 7.2% compared to 2021. Solar and wind energy provided the largest growth in renewable electricity since 2010, which reached 11.7% of the global electricity mix in 2022.   Figure 2 below presents renewable energy investments by technology between 2013 and 2022. As shown in Figure 2, photovoltaic solar. and terrestrial wind categories are dominating, accounting for 46% and 32% of the global renewable energy investment, respectively, during 2013–2022.   Economic growth supported by environmental investments is impacted by the type and number of energy used to increase the national output. Thus, both the environmental friendliness of the energy used and the rise in energy efficiency is bound to reduce carbon emissions related to energy use and encourage economic growth (Hussain and Dogan, 2021). In this context, in order to minimize emissions and ensure sustainable economic growth, renewable energy sources should be used instead of fossil resources in energy use. Increasing environmental investments on a global scale, especially a boost in renewable energy investments, is seen as a more comprehensive solution to the current global growth-development and environmental degradation balance. In this context, as a result of the latest Conference of the Parties held in Paris, namely, COP21, it was envisaged to make an agreement covering the processes after 2020, which is accepted as the end year of the Kyoto Protocol. On December 12, 2015, the Paris Agreement was adopted unanimously by the countries that are parties to the UN Framework Convention on Climate Change (Kaya, 2020). As a result of the Paris Agreement and the reports delivered by the Intergovernmental Climate Change Panels, international efforts to adapt to the action to combat climate change and global warming have increased, and awareness has been raised in this area (Irfan et al., 2021; Feng et al., 2022; Anser et al., 2020; Zhang et al., 2021; Huang et al., 2021; Fang, 2023). The rise in the demand for low-carbon energy sources in economies has been caused by environmental investments such as renewable energy investments. The countries that are party to the Paris Agreement, commit to the way to achieve efficient energy systems through the spread of renewable energy technologies throughout the country (Bashir et al., 2021; Fang, 2023). This study empirically examines the impact of the climate change performance on increasing environmental investments for E-7 countries. The climate change performance is expressed by the ‘Climate Change Performance Index’ (CCPI) developed by the German environmental and developmental organization Germanwatch. The index evaluates the climate protection performance of 63 developed and developing countries and the EU annually, and compares the data. Within this framework, CCPI seeks to increase clarity in international climate policies and practices, and enables a comparison of the progress achieved by various countries in their climate protection struggle. CCPI evaluates the performance of each country in four main categories: GHG Emissions (40% overall ranking), Renewable Energy (20%), Energy Use (20%), and Climate Policy (20%). In calculating this index, each category of GHG emissions, renewable energy, and energy use is measured by using four indicators. These are the Current Level, the Past Trend, the Current Level Well Below 2°C Compliance, and the Countries’ Well Below 2°C Compliance with the 2030 Target. The climate policy category is evaluated annually with a comprehensive survey in two ways: as the National Climate Policy and the International Climate Policy (https://ccpi.org/methodology/).  Figure 3 below shows the world map presenting the total results of the countries evaluated in CCPI 2025 and their overall performance, including the four main categories outlined above.   As it can be seen from Figure 3, no country appears strong enough to receive a ‘very high’ score across all categories. Moreover, although Denmark continues to be the highest-ranking country in the index, but it still does not perform well enough to receive a ‘very high’ score overall. On the other hand, India, Germany, the EU, and the G20 countries/regions will be among the highest-performing countries/regions in the 2024 index. When we look at Canada, South Korea, and Saudi Arabia, they are the worst-performing countries in the G20. On the other hand, it can be said that Türkiye, Poland, the USA, and Japan are the worst-performing countries in the overall ranking. The climate change performance index is an important criterion because it indicates whether the change and progress in combating climate change is occurring across all countries at an important level. The index is important in answering various questions for countries under discussion. These questions are expressed below:  • In which stage are the countries in the categories in which the index is calculated?• What policies should countries follow after seeing the stages in which they are in each category? • Which countries are setting an example by truly combating climate change? These questions also constitute the motivation for this study. The sample group for the study was selected as E-7 countries, which are called the Emerging Economies; this list consists of Türkiye, China, India, Russia, Brazil, Mexico, and Indonesia. The reason for selecting these particular countries is that they are undergoing a rapid development and transformation process, and are also believed to be influential in the future with their increasing share in the world trade volume, huge populations, and advances in technology. Besides that, when the relevant literature has been examined, studies that empirically address the relative ranking of the climate change performance appear to be quite limited. In particular, there are almost no studies evaluating the climate change performance index for the sample group considered. Therefore, it is thought that this study will be of great importance in filling this gap in the literature. The following section of the study, which aims to empirically examine whether the climate change performance is effective in developing environmental investments in E-7 countries, includes national and international selected literature review on the subject. Then, the model of the study and the variables chosen in this model are introduced. Then, the findings obtained in the study are shared, and the study ends with discussion and policy proposal. 2. Literature Review 2.1. Studies on environmental investment  The excessive use of fossil-based energy sources, considered non-renewable and dirty energy, along with industrialization, constitutes a large part of carbon emissions and is regarded as the main reason of climate change. Thus, countries have turned to renewable energy investments with the objective to minimize the reaction of climate change and global warming, by introducing technologies which are considered more environmentally friendly and cleaner. Global energy investments are estimated to exceed 3 trillion US dollars by the end of 2024, and 2 trillion US dollars of this amount will go to clean and environmentally friendly energy base technologies and infrastructure. Investment in environmentally friendly energy has been gaining speed since 2020, and the total expense on renewable energy, networks, and storage now represents a higher figure than the total spending on oil, gas, and coal (IEA, 2024). When the energy economics literature is examined, since environmental investments are mostly represented by renewable energy investments, renewable energy investments studies and studies in related fields shall be discussed in this study section. One of the important studies in this field is the work of Eyraud et al. (2013). In the study, the authors analyzed the determinants of environmental and green (clean) investments for 35 developed and developing countries. Accordingly, they stated in the study that environmental investment has become the main driving force of the energy sector, and China has generally driven its rapid growth in recent years. In addition, in terms of the econometric results of the study, it has been found that environmental investments are supported by economic growth, a solid financial system suitable for lower interest rates, and higher fuel prices. Fang (2023) examined the relationship between investments in the renewable energy sector, the economic complexity index, green technological innovation, industrial structure growth, and carbon emissions in 32 provinces in China for the period of 2005–2019 by using the GMM method. Based on the study results, the economic complexity index causes an increase in China’s carbon dioxide levels. On the contrary, all of the following – the square of the economic complexity index, investments in clean energy, green technical innovation, and the industrial structure – were found to help decrease carbon dioxide emissions. Another important study in this field is the work of Masini and Menichetti (2013). The authors examined the non-financial sources of renewable energy investments in their study. Accordingly, the study results show that knowledge and confidence in technological competence positively impact renewable energy investments. In addition, trust in policy measures only impacts PV (Photovoltaic) and hydropower investments, whereas institutional pressure negatively impacts renewable energy investments. Finally, the study stated that experienced investors are more likely to fund innovations in renewable energy. One of the important studies on renewable energy investments is the work of Ozorhon et al. (2018). To support and facilitate the decision-making process in renewable energy investments, the authors determined the main criteria affecting investors’ decisions by reviewing the literature and examining sector-level practices. According to the findings, economic criteria, like policies and regulations, funds availability, and investment costs were the most important factors in the decision-making process for renewable energy investments. Xu et al. (2024) examined the relationship between the renewable energy investments and the renewable energy development with a threshold value analysis for China. According to the results, impact of the clean (renewable) energy investment on renewable energy development has a significant threshold value, and the general relation between them is a ‘V’ type non-linear relation. At this point, the study suggests that the state should keep spending in the segment of investments in clean energy, increase the financial proficiency, and ensure an efficient financial infrastructure for clean energy in China. 2.2. Studies on Climate Change and their Impact on Economic Variables  The widespread use of fossil-based energy sources, considered dirty energy, continues to create a negative externality in carbon emissions despite the globally implemented policies like the Kyoto Protocol and the Paris Agreement (Rezai et al., 2021). The economic literature on climate change focuses particularly on the adverse effect of climate change on the economy. One of the important studies in this field is the study of Fan et al. (2019). In their study, the authors focused on the impact of climate change on the energy sector for 30 provinces in China and conducted their research with the help of a fixed-effect regression feedback model. As a result of the study, it was found that hot and low-temperature days positively affected the electricity demand. On the other hand, Singh et al. (2022) examined the effects of climate change on agricultural sustainability in India with data from 1990–2017. On the grounds of the study, it was found that India’s agricultural sector was negatively impacted by the climate change. In this regard, it is stated that India needs to take powerful climate policy action so that to reduce the adverse effect of the climate change and increase its sustainable agricultural development. One of the important studies in this field is the study of Gallego-Alvarez et al. (2013). This study investigated how the climate change affects the financial performance with a sample of 855 international companies operating in sectors with high greenhouse gas/ CO2 emissions from 2006–2009. The results reveal that the relationship between the environmental and financial performance is higher in times of economic crisis triggered by climate crisis. In other words, these results show that companies should continue investing in sustainable projects in order to achieve higher profits. Kahn et al. (2021) examined the long-term macroeconomic impact of the climate change by using a panel data set consisting of 174 countries between 1960 and 2014. According to the findings, the amount of output per capita is negatively affected by temperature changes, but no statistically significant effect is observed for changes in precipitation. In addition, according to the study’s results, the main effects of temperature shocks also vary across income groups. Alagidede et al. (2015) examined the effect of climate change on sustainable economic growth in the Sub-Saharan Africa region in their study. The study stated that the relationship between the real GDP and the climate change is not linear. In addition, Milliner and Dietz (2011) investigated the long-term economic consequences of the climate change. Accordingly, as the economy develops over time, and as progress is achieved, this situation will automatically be less affected by the adverse impact of the climate change. Structural changes made with economic development will make sectors more sensitive to the climate change, such as the agricultural sector, which would become stronger and less dependent. Dell et al. (2008) examined the effect of climate change on economic activity. The study’s main results are as follows: an increase of temperatures significantly decreases economic growth in low-income countries. Furthermore, increasing temperature does not affect economic growth in high-income countries. On the other hand, when examining the effects of climate change on the economy, the study of Zhou et al. (2023) is also fundamentally important. Zhou et al. (2023) examined the literature on the effects of climate change risks on the financial sector. In the studies examined, it is generally understood that natural disasters and climate change reduce bank stability, credit supply, stock and bond market returns, and foreign direct investment inflows. In their study for Sri Lanka, Abeysekara et al. (2023) created a study using the general equilibrium model ORANI-G-SL with the objective to investigate the economic impacts of the climate change on agricultural production. The study findings suggest that reductions in the production of many agricultural products will lead to increases in consumer prices for these agricultural commodities, resulting in a decrease in the overall household consumption. The projected decrease in crop production and increases in food prices will increase the potential for food insecurity Another important document in this field is the study by Caruso et al. (2024) examining the relationship between the climate change and human capital. The study findings reveal a two-way result regarding the effects of the climate change damages and the effects of climate change mitigation and adaptation on the human capital. Accordingly, the climate change has direct effects on health, nutrition and welfare, while changes in markets and damage to the infrastructure are expressed as indirect effects. In addition to these studies, the uncertainty of the climate change policies also exerts an impact on economic factors. Studies conducted in this context in recent years have also enriched the literature on the climate change. For example, Çelik and Özarslan Doğan (2024) examined the effects of uncertainty of the climate change policies on economic growth for the USA by using the ARDL bounds test. Their results confirmed the existence of a positive and statistically significant relationship between the climate policy uncertainty and economic growth in the USA. 3. Model Specification  This study empirically examines whether the climate change performance index successfully develops environmental investments in E-7 countries. For further details related to the mathematical model check https://doi.org/10.15388/Ekon.2025.104.2.6 4. Conclusion and Policy Implications  Today, many national and international initiatives are within the scope of combating global warming and climate change. In addition, many developed and developing countries are differentiating their growth and development policies with the objective to prevent these disasters. Although they vary from country to country, as well as from region to region, these policies mostly represent those policies which reduce carbon emissions and ensure energy efficiency. At this point, the key factor is renewable energy investments, which represent environmentally friendly investments. However, according to Abban and Hasan (2021), the amount of environmentally friendly investments is not the same in every country. This is because the determinants of environmentally friendly investments vary from country to country. While financial and economic factors are more encouraging in increasing these investments in some countries, international sanctions are the driving force in this regard in some other countries as well. This study aims to empirically examine whether CCPI is effective in the success of environmental investments in the E-7 countries in the period of 2008–2023 with the help of the Parks-Kmenta estimator. In this direction, the study’s dependent variable is environmental investments, represented by renewable energy investments. On the other hand, the climate change performance is represented by the ‘Climate Change Performance Index’ calculated by Germanwatch, which constitutes the main independent variable of the study. Other control variables considered in the study are the population growth, the real GDP per capita, and inflation. The study findings provide strong evidence that increases in the climate change performance support environmental investments. High-rate climate change performance drives governments and investors toward investing in this area; thus, environmental investments tend to increase. These results are consistent with the study results of Raza et al. (2021). As a result of their study, Raza et al. (2021) stated that the climate change performance is an important channel for the general environmental change, and that renewable energy has a very important role in this regard.  In addition, the study concludes that population growth and inflation negatively affect environmental investments. These results are consistent with Suhrab et al. (2023), but not with Yang et al. (2016). While Suhrab et al. (2023) obtained results regarding the negative effects of inflation on green investments, Yang et al. (2016) focused on the positive effect of population on renewable energy. Finally, the effect of the real GDP per capita on environmental investments has been found to be positive. These results are also consistent with Tudor and Sova (2021). The authors found that Real GDP encourages green investments. This study offers policymakers a number of policy recommendations. These are presented below. • One of the important factors affecting the climate change performance is the raising of awareness of the populations in these countries at this point, and providing them with the knowledge to demand clean energy. In this way, consumers, would demand environmental energy, and investors would invest more in this area. This is of great importance in increasing environmental investments. • The climate change performance also shows how transparent the energy policies implemented by countries are. Therefore, the more achievable and explanatory are the goals of policy makers in this regard, the more climate change performance will increase, which will strengthen environmental investments. • Moreover, the initial installation costs are the most important obstacles on the way toward developing environmental investments. At this point, the country needs to develop support mechanisms that would encourage investors to invest more. • Environmental investments, similar to other types of physical investments, are greatly affected by the country’s macroeconomic indicators. At this point, a stable and foresighted economic policy will encourage an increase in such investments. The countries in the sample group represent developing countries. Therefore, in many countries in this category, the savings rates within the country are insufficient to make investments. 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한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском AbstractPurpose The purpose of this paper is to analyse the international political economy of Korea and its effects due to geopolitical tension between China and the USA. Design/methodology/approach Economic war between China and the USA has prolonged longer than expected. Aftermath of the COVID-19 pandemic, reforming the supply chain has been the centre of economic tension between China and the USA. Quite recently, with the rapid expansion of Chinese e-commerce platforms, distribution channels come upon a new economic tension between the two. And now is the time to pivot its pattern of conflict from competition into cooperation. In this end, economic diplomacy could be a useful means to give a signal of cooperation. From the view of economic diplomacy, this paper tries to analyse the projected transition of economic war between China and the USA with its implication on the trade policy of Korea. Findings As an implementation of economic diplomacy, China suggested the Belt and Road Initiative (BRI), enhancing trade logistics among related countries to gain competitiveness. In 2023, the Biden administration suggested the India-Middle East and Europe Economic Corridor as a counter to BRI, which will be a threshold for changing trade policy from economic war into economic diplomacy. As a result, it is expected China and the USA will expand their economic diplomacy in a way to promote economic cooperation among allied states, while the distribution channel war would continue to accelerate the economic tension between China and the USA. Korea has to prepare for and provide measures handling this geopolitical location in its trade policy or economic diplomacy. Originality/value This research contributes to the awareness and understanding of trade environments from the perspective of economic diplomacy. 1. Introduction The advent of globalisation has led to widespread economic integration, creating global production networks and markets. However, the COVID-19 pandemic has acted as a significant setback to this trend. In the wake of COVID-19, an economic war has arisen between China and the USA, centred on the restructuring of global supply chains following widespread disruptions. International political economy (IPE) examines the power dynamics between states and the structures of influence within regional economies. Consequently, economic diplomacy has gained unprecedented attention. Economic diplomacy focuses on government actions regarding international economic issues, distinct from political diplomacy through its market-oriented approach in foreign policy. Putnam (1988) categorises economic diplomacy into two levels: unilateralism and bilateralism. Unilateral economic diplomacy (or unilateralism) often relies on hard power, involving decisions on trade liberalisation or market protection without negotiation. Bilateral economic diplomacy (or bilateralism) or multilateral economic diplomacy (or multilateralism), by contrast, involves negotiation among trade partners, resulting in agreements such as regional or global free trade agreements (FTAs). A vast range of state or non-state actors engage in economic diplomacy, navigating the complex interplay between international and domestic factors. Defining economic diplomacy is extremely challenging, but one useful definition is “the broad concept of economic statecraft, where economic measures are taken in the pursuit of political goals, including punitive actions such as sanctions” (Blanchard and Ripsman, 2008).  Figure 1 Recent trend of economic diplomacy To exert influence internationally, ministers and heads of government strive to demonstrate their capacity for national security through two primary approaches, as shown in Figure 1 (above): economic war (or competition) and economic diplomacy (or international cooperation). In the context of global supply chain restructuring, the economic conflict between China and the USA has intensified, marked by threats of supply chain disruptions. This has led to emerging strategies aimed at “crowding out” the USA from global supply chains (去美戰略) or excluding China through alliances such as the Allied Supply Chain and Chip 4. While economic war is inherently “temporary” due to its painstaking nature, economic diplomacy or international cooperation offer a more “long-term” approach because it is gains-taking. This paper analyses the factors contributing to the prolonged nature of this economic war and explores potential outcomes of the supply chain tensions between China and the USA from the perspectives of IPE or geo-economics. In conclusion, it highlights the importance of preparing for trade policy adjustments and strategic economic diplomacy. 2. International trade war and strategic items2.1 Supply chain The supply chain encompasses a network of interconnected suppliers involved in each stage of production, from raw materials and components to the finished goods or services. This network can include vendors, warehouses, retailers, freight stations and distribution centres. Effective supply chain management is a “crucial process because an optimised supply chain results in lower costs and a more efficient production cycle” [1]. Within the supply chain, a leading company typically holds governance power, enabling it to coordinate scheduling and exercise control across the interconnected suppliers, resulting in reduced costs and shorter production times (Gereffi et al., 2005) [2]. Since the 2000s, forward and backward integration have been key strategies for managing time, cost and uncertainty in supply chains. For example, Toyota’s Just-In-Time (JIT) system demonstrated the efficiency of locally concentrated supply chains until disruptions from the 2011 East Japan Earthquake and the Thailand flood. Following supply chain shutdowns in 2020, many businesses shifted from local to global supply chains, utilising advancements of the information technology (IT) and transportation technologies to geographically diversify operations. As the need for a systematically functioning global supply chain has grown, a leading nation, much like a leading company, often assumes governance power in international trade and investment, as illustrated in Figure 2 (below), by aligning with the leadership of a dominant market competitiveness, which makes this leadership valuable.  Figure 2 Supply chain The COVID-19 pandemic dealt a severe blow to the global supply chain, causing sudden lockdowns that led to widespread supply chain disruptions. To mitigate the risks of future global disruptions, supply chains have begun restructuring to operate on a more regionally segmented basis. In this shift toward regional supply chains, China and the USA are at the centre, drawing allied countries within their spheres of influence. This alignment helps explain why the economic war between China and the USA has lasted longer than anticipated. 2.2 Strategic items China has restricted exports of two rare metals, gallium and germanium, which are critical to semiconductor production. Kraljic (1983) highlighted the importance of managing “strategic items” within the framework of supply chain management, as shown in Figure 3. Kraljic emphasises the need to strengthen and diversify critical items. The Kraljic matrix provides a valuable tool for identifying essential items that require focused management within the supply chain.  Figure 3 Kraljic matrix Kraljic identified the importance of managing “bottleneck items” in strategic supply chain management – items that present high supply risk but have relatively low business value. Due to the potential costs associated with non-delivery or compromised quality of strategic items, these must be closely monitored and controlled. From a risk management perspective, establishing medium-term business relationships and collaboration with suppliers is essential. For example, South Korea imports over 90% of its urea for agricultural and industrial purposes from China [3]. Heavily dependent on China for urea supplies due to pricing factors, Korea faced challenges when China imposed export controls on urea, underscoring Korea’s vulnerability within China’s sphere of influence. The European Union (EU) also faces challenges with critical raw materials (CRMs). China remains the EU’s sole supplier of processed rare earth elements, while Chile supplies 79% of its lithium. In response, the EU introduced the CRM Act (CRMA) to support projects aimed at increasing “the EU’s capacity to extract, process, and recycle strategic raw materials and diversify supplies from the third countries” [4]. 2.3 Resilient supply chain alliance In contrast to China’s approach of leveraging supply disruptions to strengthen its influence, the Biden administration in the USA has adopted a cooperative approach focused on building resilient supply chains (Pillar 2) through the Indo-Pacific Economic Framework (IPEF), which includes 14 member countries [5]. The need for resilient supply chains has been further underscored by the Russia–Ukraine crisis. The IPEF aims to address supply chain vulnerabilities by fostering global efforts to reduce risks associated with concentrated, fragile supply chains [6].  Figure 4 Resilient supply chain alliance In Figure 4, the EU Commission presented the Single Market Emergency Instrument (SMEI) in September 2022, a crisis governance framework designed to ensure the availability of essential goods and services during future emergencies. The SMEI operates on three levels: contingency planning, vigilance and emergency. The contingency planning phase focuses on collaboration among member states to mitigate supply chain disruption and monitor incidents. The vigilance phase can be activated when a significant disruption is anticipated, enabling specific measures such as mapping and monitoring supply chains and production capacities. Finally, the emergency phase is activated in cases of severe disruption to the functioning of the single market [7]. Establishing a resilient supply chain through international cooperation may be appealing, yet the reality often falls short of the ambition. In South Korea, the IPEF took effect on 17 April 2024, after an extended negotiation process, marking the first multilateral agreement on supply chains. As a result, during non-crisis periods, the 14 member countries will collaborate to strengthen international trade, investment and trade logistics. In times of crisis, member countries will activate a “crisis response network”. Conversely, opportunities for negotiation with China, South Korea’s largest trading partner, are essential for building supply chain resilience [8]. China has pursued an industrial policy focused on enhancing its supply chain management capabilities. In the semiconductor sector, the decoupling between China and the USA has become increasingly evident. Contrary to expectations, China has adopted a policy of internalising its supply chains, returning to the integration strategies of the 2000s rather than furthering globalisation. A promising opportunity for transformation between the two countries has emerged recently. Since 2015, China and South Korea have maintained bilateral FTA, and with the second phase of FTA negotiations currently underway, there is an opportunity to strengthen trade and investment ties, fostering positive progress through international cooperation. 2.4 China manufacturing exodus During the COVID-19 pandemic, China imposed sudden lockdowns without prior notice or preparation, halting production and logistics cycles. This “zero COVID” policy may have triggered a shift towards “de-risking” China from supply chain disruptions. Although China still offers significant advantages as “the factory of the world,” with vast market potential, prolonged trade tensions with the USA, intensified during the Trump administration, have prompted global manufacturers with substantial USA market bases to relocate operations amid rising geopolitical uncertainties. For example, Nike and Adidas have shifted much of their footwear manufacturing to Vietnam, Apple has begun iPhone production at a Foxconn in Chennai, India, and AstraZeneca has contracted production with India’s Serum Institute. In the pre-globalised era, defining the Rule of Origin (ROO) was straightforward, as a product’s components were usually manufactured and assembled within a single country. However, with the complexity of global supply chains, particularly since 2012, determining ROO has become a time-consuming and subjective process. ROO are classified as either non-preferential or preferential. The USA applies non-preferential ROO to restrict imports from countries like Cuba, Iran and North Korea, while offering trade preference programmes for others. Preferential ROO are used to determine duty-free eligibility for imports from approved countries [9], whereas non-preferential ROO play a crucial role in “country of origin labelling, government procurement, enforcement of trade remedy actions, compilation of trade statistics, supply chain security issues.” [10] China manufacturing exodus may negatively impact capital inflows into Hong Kong, traditionally seen as the Gateway to China. In 2023, Hong Kong’s initial public offering volume fell to a 20-year low of $5.9bn [11]. While China-oriented business remains in Hong Kong, which returns fully to Chinese control in 2047, non-China-oriented businesses have migrated to Singapore. As the certainty of contract and ownership rights forms the foundation of capitalism, this capital flight from Hong Kong is likely to persist. 3. Trade logistics and economic corridors Globalisation has allowed supply chains to leverage interdependence and interconnectedness, maximising efficiency. However, while these efficiencies have been beneficial, they have also created a fertile ground for friction between trade partners due to a “survival of the fittest” mindset and the principle of “winner takes all.” This interdependence has also highlighted vulnerabilities; the global supply chain struggled to manage the disruptions caused by COVID-19, prompting a shift towards regional integration initiatives, such as Association of Southeast Asian Nations, Regional Comprehensive Economic Partnership, United States–Mexico–Canada Agreement and Comprehensive and Progressive Agreement for Trans-Pacific Partnership. As the global economy seeks stability, collaboration over competition has become increasingly essential, with economic diplomacy emerging as a priority. The prolonged economic war between China and the USA arguably needs to shift towards economic diplomacy. The global supply chain is restructuring into regional supply chains, building resilience by operating in regional segments that can withstand crises. Michael Porter introduced the concept of value chain as “a set of activities that a firm performs to deliver a valuable product or service to the market.” [12] Complex finished goods often depend on global value chains, traversing multiple countries. As shown in Figure 5, the value chain consists of supply chain and trade channel components. While the focus has traditionally been on which country holds lead status within a regional supply chain, the emphasis is now shifting to how these regional segments can be interconnected and relayed. In this context, the supply chain competition may evolve into a “channel war” in international trade, where trade logistics will centre on the internal flow of goods, standardising channel processes and establishing authority over these channels.  Figure 5 Supply chain v. trade channel 3.1 Trade logistics It is natural for governments to seek environments that enhance competitiveness within in their countries. In terms of trade, effective trade logistics are essential for maintaining competitive advantage. As a prerequisite, a strong IT management infrastructure is indispensable. As shown in Figure 6, trade logistics encompass the internal flow of goods to market, integrating physical infrastructure with operating software – such as transport hubs, warehouses, highways, ports, terminals, trains and shipping vessels. Key areas of conflict in trade logistics involve the standardisation of channel processes and determining who holds governance over operation of these logistics systems. This is equally relevant within the digital economy. Recently, Chinese e-commerce – often referred to as C-commerce – has aggressively sought to gain control over digital distribution channels, interconnected delivery networks and trade logistics via digital platforms. Chinese platforms such as Taobao, Temu and AliExpress are actively working to increase their monthly active users (MAUs), positing themselves as counterweights to USA-based platforms such as Amazon and eBay in digital trade [13].  Figure 6 Trade logistics When the agenda of establishing international trade logistics is introduced to relevant trade members across various countries, initial progress and effective responses are often achieved. However, efforts soon encounter obstacles related to standardising logistics processes and establishing operational governance. Greater reliance on international institutions could help resolve these issues (Bayne, 2017). Yet governments frequently prioritise domestic interests, and after prolonged negotiations, the risk of international agreements failing increases. Amid the economic war between China and the USA, China launched a trade logistics initiative known as the Belt and Road Initiative (BRI), or One Belt One Road, in 2013. Often referred to as the New Silk Road, the BRI aims to establish economic corridors for trade logistics. The World Bank estimates that the BRI could boost trade flows by 4.1% and reduce trade costs by 1.1% [14]. In response, the Biden administration proposed the India-Middle East and Europe Economic Corridor (IMEC) in September 2023 to strengthen transport and communication links between Europe and Asia as a countermeasure to China’s BRI. IMEC has been well received by participating countries, with expectations of fostering economic growth, enhancing connectivity and potentially rebalancing trade and economic relations between the EU and China [15]. Both BRI and IMEC are ambitious projects aimed at boosting international trade through substantial investments in trade logistics infrastructure. Each seeks to assert governance over international trade channels, signalling that the supply chain war may soon evolve into a trade channel war between China and the USA. 3.2 Economic corridors Economic corridors are transport networks designed to support and facilitate the movement of goods, services, people and information. These corridors often include integrated infrastructure, such as highways, railways and ports, linking cities or even countries (Octaviano and Trishia, 2014). They are typically established to connect manufacturing hubs, high-supply and high-demand areas, and producers of value-added goods. Economic corridors comprise both hard infrastructure – such as trade facilities – and soft infrastructure, including trade facilitation and capacity-building measures. The Asian Development Bank introduced the term “economic corridor” in 1998 to describe networks connecting various economic agents within a region [16]. Economic corridors are integrated trade logistics networks, providing essential infrastructure for connecting regional segments of supply chains. As supply chains increasingly operate in regional “chunks,” linking these segments becomes ever more important. Economic corridors typically include a network of transport infrastructure, such as highways, railways, terminals and ports. Initiatives like the BRI and IMEC use economic corridors as instruments of economic diplomacy, shifting strategies from hard power to soft power, as shown in Figure 7. Because less-developed or developing countries often lack sufficient funding to invest in trade logistics, they tend to welcome these initiatives from developed countries, which offer international collaboration and support. However, these initiatives usually come with the condition that participating countries must accept standardised trade processes and governance led by the sponsoring developed country.  Figure 7 Economic corridor initiatives as economic diplomacy To succeed, economic corridors must meet three key conditions [17]. First, government intervention is essential, as economic corridor initiatives primarily involve public infrastructure investments beyond the scope of the private sector. In realising these projects, governments must reconcile three tensions to ensure their policies are mutually supportive: tensions between politics and economics, between international and domestic pressures and between governments and other stakeholders. Second, intermediate outcomes should be measured and demonstrated as results of economic corridors, allowing participants to experience tangible benefits throughout these longer-term projects. Finally, economic corridors should deliver broader benefits. Participants need incentives to utilise the infrastructure sustainably. These benefits may extend beyond economic welfare, such as wages and income, to include social inclusion, equity and environmental gains, which support the long-term viability of the infrastructure. 4. BRI vs IMEC4.1 Belt and Road Initiative (BRI) - Silk Road The BRI can be a modern-day realisation of the Silk Road concept, connecting Europe as a market base with China as a production base. Unlike the ancient Silk Road, which connected trade routes across Eurasia, the BRI poses potential challenges due to its extensive connectivity. Firstly, there are social and environmental externalities, such as increased congestion and accidents from concentrating traffic flows through limited links and nodes within trade networks. Secondly, while the connectivity may benefit the production and market bases at either end, regions situated between these hubs, through which highways and railways pass, may gain minimal advantage. Thirdly, there is often a mismatch between where costs and benefits are realised. Transit regions that facilitate network traffic often see fewer direct benefits compared to high-density nodes within the network. 4.2 India-Middle East and Europe Economic Corridor (IMEC) - The Spice Road The ancient Spice Roads once connected the Middle East and Northeast Africa with Europe, facilitating the exchange of goods such as cinnamon, ginger, pepper and cassia, which, like silk, served as a form of currency. The IMEC proposes a modern route from India to Europe through the United Arab Emirates (UAE), Saudi Arabia, Israel and Greece. Since its announcement in September 2023, some regional experts have expressed reservations about its feasibility, particularly regarding the connection between the Middle East and Israel. The project has faced delays due to the Israel–Hamas war. Despite these challenges, IMEC holds potential to drive economic growth and strengthen connectivity, especially as countries like Vietnam and India emerge as alternative manufacturing bases for companies relocating from China. For Saudi Arabia and the UAE, IMEC is not viewed as a challenge to China but rather as an opportunity to diversify their economies and solidify their roles within the Middle East region [18]. 5. Conclusion A new trade war between China and the USA has begun, with the Biden Administration’s introduction of IMEC as a counter to China’s BRI. This shift could soon transform the nature of economic war from a focus on supply chains to one on trade channels. The China manufacturing exodus was further accelerated by supply disruptions during the COVID-19 pandemic. Amidst the economic tensions between China and the USA, the restructuring of global supply chains into regional networks has made significant progress. With China maintaining its stance on export controls for strategic items, South Korea must prepare for resilient supply chain management. In relation to China–Korea FTA, which is currently undergoing its second phase of negotiation, South Korea should seek clarity on the transparency of China’s strategic item controls. The Committee on Foreign Investment in the United States (CFIUS) plays a key role in monitoring the quality of inbound investments; similarly, South Korea is experiencing increased inbound investment due to the manufacturing shift from China and should apply similar standards to evaluate investment quality. This emerging economic war between China and the USA is now marked by the competing initiatives of the BRI and IMEC. The BRI can be viewed as a modern Silk Road, linking China with Europe, while the IMEC seeks to establish a trade logistics corridor connecting Saudi Arabia, the UAE, Israel and Greece. The South Korean Government should take proactive steps to prepare for the evolving dynamics of the trade war between China and the USA. CitationOh, J.S. (2025), "International trade war - Spice Road against Silk Road", International Trade, Politics and Development, Vol. 9 No. 1, pp. 2-11. https://doi.org/10.1108/ITPD-06-2024-0031  Notes 1. https://www.investopedia.com/terms/s/supplychain.asp2. According to Gary Gereffi et al, 5 governance types of a lead company could be categorised as market, modular, relational, captive and hierarchy.3. Korea imports urea from 12 countries including Qatar, Vietnam, Indonesia and Saudi Arabia, in addition to China.4. https://single-market-economy.ec.europa.eu/sectors/raw-materials/areas-specific-interest/critical-raw-materials/strategic-projects-under-crma_en5. IPEF was launched on May 23,2022 at Tokyo. 14 member countries are Australia, Brunei, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Vietnam and the USA. 4 Pillar of IPEF are Trade (Pillar 1), Supply Chain (Pillar 2),Clean Economy (Pillar 3) and Fair Economy (Pillar 4).6. Critics say “lack of substantive actions and binding commitments, instead focusing on process-driven framework building.” https://www.piie.com/blogs/realtime-economics/its-time-ipef-countries-take-action-supply-chain-resilience7. https://ec.europa.eu/commission/presscorner/detail/en/ip_22_54438. As of 2023, the first-largest trade partner of Korea is China (Trade volume of $267.66bn), the second is the US ($186.96bn) and the third is Vietnam ($79.43bn)9. As preferential ROO contain the labour value content requirement in the USMCA, it could increase compliance costs for importers. https://crsreports.congress.gov/product/pdf/RL/RL3452410. USITC(1996), Country of Origin Marking: Review of Laws, Regulations and Practices, USITC Publication 2975, July, pp. 2–411. https://www.barrons.com/articles/hong-kong-financial-center-china-46ba5d3612. Porter identifies a value chain broken in five primary activities: inbound logistics, operations, outbound logistics, marketing and sales and post-sale services. https://www.usitc.gov/publications/332/journals/concepts_approaches_in_gvc_research_final_april_18.pdf13. MAU is a metric commonly used to identify the number of unique users who engage with apps and website. MAU is an important measurement to the level of platform competitiveness in the digital trade logistics or e-commerce industry.14. https://home.kpmg/xx/en/home/insights/2019/12/china-belt-and-road-initiative-and-the-global-chemical-industry.html15. https://www.bradley.com/insights/publications/2023/10/the-india-middle-east-europe-economic-corridor-prospects-and-challenges-for-us-businesses16. The Asian Development Bank (ADB), which first used the term in 1998, defines economic corridors as important networks or connections between economic agents along a defined geography, which link the supply and demand sides of markets. http://research.bworldonline.com/popular-economics/story.php?id=350&title=Economic-corridors-boost-markets,-living-conditions17. Legovini et al. (2020) comments traditional cross border agreements of transport investment focuses only on a narrow set of direct benefits and cost. However, economic corridors can entail much wider economic benefits and costs such as trade and economic activity, structural change, poverty reduction, pollution and deforestation.18. Arab Centre Washington D.C. https://arabcenterdc.org/resource/the-geopolitics-of-the-india-middle-east-europe-economic-corridor/ References Bayne, N. (2017), Challenge and Response in the New Economic Diplomacy, 4th ed., The New Economic Diplomacy, Routledge, London, p. 19.Blanchard, J.M.F. and Ripsman, N.M. (2008), “A political theory of economic statecraft”, Foreign Policy Analysis, Vol. 4, pp. 371-398, doi: 10.1111/j.1743-8594.2008.00076.x.Gereffi, G., Humphrey, J. and Sturgeon, T. (2005), “The governance of value chain”, Review of International Political Economy, Vol. 12 No. 1, pp. 78-104, doi: 10.1080/09692290500049805.Kraljic, P. (1983), “Purchasing must be supply management”, Harvard Business Review, Vol. 61 No. 5, September.Legovini, A., Duhaut, A. and Bougna, T. (2020), “Economic corridors-transforming the growth potential of transport investments”, p. 10.Octaviano, B.Y. and Trishia, P. (2014), Economic Corridors Boost Markets, Living Conditions, Business World Research, Islamabad, October.United States International Trade Commission (USITC) (1996), “Country of origin marking: Review of Laws, Regulations, and Practices”, USITC Publication, Vol. 2975, July, pp. 2-4.Further readingPorter, M. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press.Putman, R.D. (1988), “Diplomacy and domestic politics; the logic of two-level games”, International Organization, Vol. 42 No. 4, pp. 427-600.USITC (2019), “Global value chain analysis: concepts and approaches”, Journal of International Commerce and Economics, April, pp. 1-29.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The tariff war launched by US President Donald Trump has entered a phony war stage. But the next six months will reveal the true impact of a threatened trade war. The 8-month period in 1939–40 after Hitler’s invasion of Poland but before major Nazi attacks on the Allies was called the ‘phony war’. It was a time of high uncertainty but relative calm, with a hope in some quarters that the worst risks had been avoided. Today, the pace of the tariff war launched by US President Donald Trump on ‘Liberation Day’ seems to be following the same trajectory. The reaction of ‘shock and awe’ at the pace of action during Trump’s first hundred days culminated with the 2 April announcement of ‘reciprocal tariffs’ imposed on friends and foes alike. The president used executive orders as his legal tool, and Truth Social as his personal communications channel, to dominate the news and evade normal checks and balances. His new tariff regime threw financial markets into a panic and threatened complex global supply chains. A tit-for-tat escalation of tariffs on China added fuel to the fire. Then, within days, the phony war period began with the pausing of most threatened tariffs and the partial reductions negotiated with China. This buoyed the financial markets, reassuring some that the disruptions of President Trump’s first hundred days were part of a strategy that would settle into a pattern of more deals and less economic damage. The partial trade deal with the UK was reassuring, while the latest skirmish between the US and the EU keeps suspense high. But postponing the application of threatened tariffs is more of a ceasefire in Trump’s trade war, not a resolution. Much less a surrender. Positive signs, but backward looking Recent data provide some superficial reasons to be positive about the health of the US economy. US corporate earnings in the first quarter came in mostly on track. Share prices of big tech companies have regained much of the value they had lost in the wake of Liberation Day. US inflation fell slightly in April to an annual rate of 2.3 per cent, showing little sign of impact from tariffs. Even the unwelcome surprise of the 0.3 per cent fall in first quarter GDP (on an annual basis) was partly explained by a surge in imports as US companies built up their inventories to prepare for the tariff threat. All of this data, of course, is backward looking. There are early indications, and strong reasons to believe, that the real damage is yet to come and that the US is entering a period of stagflation that will lead to a recession by the end of this year. Inflation prospects First, consider inflation. While in May the Consumer Price Index (CPI) fell slightly compared to a year ago, it ticked up slightly in April compared to a month ago. That was a reversal in  the first monthly reading after the Liberation Day announcements. The widely watched survey of US consumer sentiment produced by the University of Michigan hit a near record low in May, sliding to 50.8 – just shy of the all-time low seen in June 2022. The survey pinpointed tariffs as leading to that decline in confidence, based on worries about a renewed surge of inflation.  The same survey of expected inflation 12 months ahead rose to an astonishing 7.3 per cent, up from 6.5 per cent expected in April. Were that to become reality it would be the US’s highest level since 1981. Businesses too are concerned. The chief executive of Walmart has warned that ‘even at reduced levels, the higher tariffs will result in higher prices.’ The Yale Budget Lab estimates that the overall US effective tariff rate is now 17.8 per cent compared to 2.5 per cent when President Trump took office in January. There can be little doubt that such a jump in tariffs will spur a rise in inflation in the coming months. A further risk will develop if the large tax cut  package under consideration by Congress results in a substantial rise in the government deficit, which is already running close to 7 per cent of GDP this year. Moody’s credit rating agency downgraded its AAA rating on US government debt in May.  The labour market is tight, with unemployment hovering around 4 per cent.  Fiscal stimulus applied to an economy that is near full employment is a classic recipe for higher inflation. While these risks remain, it is unlikely that the US Federal Reserve will be quick to cut interest rates. Indeed, in its May meeting, it voted to leave interest rates on hold, despite calls from President Trump to lower them. Fed Chair Jerome Powell said ‘We can move quickly when that’s appropriate, but we think right now the appropriate thing to do is wait and see how things evolve.’ This is the prudent policy when there are two-sided risks in a stagflationary environment. Growth prospects Now consider the prospects for growth, where expectations and international repercussions are especially important. The drop in consumer confidence has been cited above.  Many large companies declined to provide sales or earnings forecasts with their Q1 results due to the uncertain environment. The chief executive of Maersk, the global shipping giant, warned that world trade volumes could contract by up to 4 per cent this year – compared to their previous projection of 4 per cent growth. Exports account for 29 per cent of global GDP. A contraction in global trade would represent a global supply shock to growth, not only for the US but especially for trade-intensive countries and regions such as the EU. The end of the ‘phony war’ As July approaches and the tariff ceasefires are due to end, this ‘phony war’ period will evolve into a spreading recognition of the real economic consequences of a trade war. Between now and then, the US may sign a few more deals. But current negotiations with the EU have stalled, provoking new threats by the US and then an agreed deadline of 9 July for more negotiations. Even if a short-term EU–US deal can be agreed, it will still leave US tariffs on EU goods substantially higher than before. Anxiety will build, stockpiles of imported goods will be running down, and businesses will see profits fall. Meanwhile, the US debt ceiling of $36 trillion is fast approaching and a Congressional agreement will be needed sometime between mid–July and early October if the US is to avoid default, according to the Bipartisan Policy Center. The usual brinkmanship will roil financial markets. These next six months will reveal the true impact of the threatened trade war. Uncertainty will give way to damage limitation in the form of higher prices to reflect higher costs, lower consumer demand and postponed investment.  The likelihood of two or three more quarters of below zero growth in the US is high. The irony is that as long as the US consumes more than it produces, higher US tariffs will do little to shrink the US trade deficit. But a tariff-induced recession in the US probably will.  

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Abstract The defining political shift of our era is the revolt of the lower middle class. Much more exposed than the better-off to the succession of crises in recent years—from the financial crisis to uncontrolled migration, from Covid-19 to Russia’s aggression against Ukraine—the lower middle class is turning to the populist right and its promise of protection by closure. Unlike the US first-past-the-post system, the EU’s institutional framework emphasises compromise and cross-party cooperation and thus offers a critical buffer against this wave of disruption. But this is not enough to protect our post-1945 political order, which is based on parliamentary democracy, the rule of law and European integration, from both internal and external threats. The EU needs a bold agenda that focuses on competitiveness, growth, migration and defence, all of which are crucial to strengthening our continent. Introduction1 Once is an accident, twice the new normal. With his electoral success, Donald Trump is the new reality in the US, not just an aberration. Trump obviously understands his time better than anybody else, which ensured him his comeback as president of the US, elected by the people against seemingly overwhelming legal and political resistance. He is the new rule of the game, like it or not. The revolt of the lower middle classWhat is the new reality? The party political system in the US and Europe has been fundamentally transformed by the revolt of the lower middle class. Voter analyses in several European countries give a clear picture: in France, Marine Le Pen and the National Rally (Rassemblement National) represent the ‘défavorisés’ like no other party and have replaced in that function the traditional left. Le Pen is successful in the former Communist heartland and mining territory of northern France, where she also assured her own seat in parliament (Ipsos 2024). Similarly, Alternative for Germany (Alternative für Deutschland, AfD) is electorally over-represented among workers and the unemployed and those with below average incomes and education (Moreau 2024a). And the Freedom Party of Austria (Freiheitliche Partei Österreichs, FPÖ) rallies the workers too (Moreau 2024b). This should not come as a big surprise. Right-wing populist parties have been recognised in political science as unconventional workers’ parties for more than a decade (Rydgren 2013). And the transformation of the political space in Europe has been ongoing for more than a decade as well. European Parliament elections are an excellent monitor of the overall situation in Europe and the member states. The outcome of the 2024 European Parliament elections shows us a political space that is basically divided into three parts. One-third of the members now sit on the left, organised in the Green, Socialist and Left groups; a good third are in the centre, encompassing the Liberals and the Christian Democrat European People’s Party (EPP); and close to a third now belong to the populist and radical right (European Parliament 2024). In the US, Trump’s success was assured in 2016 through gains in the ‘rustbelt states’, formerly the Democrat Party’s heartland. In 2020 Joe Biden was able to narrowly turn the tide. With his credibility among workers—acquired over decades through close cooperation with the trade unions—he was able to achieve what presidential candidates from liberal New York and California, Hillary Clinton and Kamala Harris, could not. The Republican Party today is the Make America Great Again Party. It is the party of Donald Trump. The Republican Party of Ronald Reagan and George Bush does not exist anymore. The party that used to represent the highly skilled today represents and owes its electoral success to the lower-skilled working class. ‘National security Republicans’ have lost their political home. Why is the lower middle class revolting? The lower middle class can be identified as those whose economic situation is tense. In other words, they have no financial buffer and anything unexpected happening can push them over the edge. In the US, this group, known as those living ‘from paycheque to paycheque’, is considered to comprise 25% to 30% of the population. A single paycheque not arriving might force people belonging to this group to sell their car; several paycheques not arriving might oblige them to sell their house (Bank of America Institute 2024). Ever since the financial crisis that started in 2008, we have gone in Europe from crisis to crisis. The drawn-out financial crisis was followed by uncontrolled migration as a consequence of Russia’s bombardment of big cities in Syria, and this was followed by Covid-19 and then Russia’s aggression against Ukraine, which caused major spikes in energy and food prices and another massive wave of migration. What we call a ‘crisis’ might equally be considered a lack in performance of the system overall and an indication of increasing loss of control. Russia is being aggressive militarily and in other ways because it believes it can do so and get away with it. External borders prove time and time again to be porous. After the Second World War, the German economy grew by an average of about 5% per year; but in the last five years, this has dropped to 0% and even into the negative. What can be weathered by the better-off is an existential challenge for the lower middle class. If you are not already on the housing ladder by luck of birth, it is increasingly difficult to get onto. The social elevator is stuttering. And while migration is perceived by the upper middle class as the promise of affordable personal services today and care in old age later, for the lower middle class it means competition for affordable housing and state services, and the risk of decreasing educational standards for children in their lower-income living areas. German sociologist Andreas Reckwitz (2020) describes the experience of the lower middle class as one of a double devaluation: economic and cultural. It is economic because formerly well-paid industrial workers are falling increasingly behind the new university-educated service class. And it is cultural because their system of traditional values is regarded as outdated and destined to be superseded. From a horizontal to a vertical understanding of the party political system The traditional horizontal classification of parties on a left to right axis is very misleading now. To understand what is happening, we need to replace the traditional horizontal classification with a vertical one based on social status, income and education. On the basis of the 2021 German federal election and data provided by the Bundestag (data no longer available online) and others (Focus online 2021), we can construct such a vertical system for Germany: 1. Greens and liberals represent younger voters, with a very good income in the case of the liberals and an average income, but outstanding level of education, when it comes to the greens, the new party of the Bildungsbürgertum (the very well-educated). These voters can together be considered the upper middle class and the most dynamic part of society.2. The traditional people’s parties, the Christian Democrats and the Social Democrats, become more popular the older the cohort, with their popularity rocketing among those above 70 years old. The income levels of the voters of these parties are average, as is their education, and this voter base is shrinking. These parties represent the middle class.3. The Left (Die Linke) is over-represented among academics and the unemployed; its electorate has a below-average income. The extreme-right AfD is over-represented among workers, the unemployed and people of working age. The educational levels of these voters are low, and their household incomes are below average. The Left and the AfD both represent the lower middle class. The part of the lower middle class that is represented by the populist right is being promised protection by closure. Right-wing populism is therefore ‘social nationalism’. But it is not just about the programme. Bringing that new coalition of various social groups together is facilitated by charismatic leadership: Trump is a charismatic leader in the sense of Max Weber (1921); and he finds his European equivalents in the likes of Nigel Farage, Boris Johnson, Marine Le Pen and Viktor Orbán. Moreover, the dominance of social media over the traditional media has dramatically decreased the cost of political organisation and provided a chance for newcomers to establish themselves. Social media have also normalised hate, which was banned from the traditional media for very good reasons after the dramatic experiences of racism, National Socialism and Communism in the twentieth century. Political parties based on portraying political adversaries as enemies in the tradition of Carl Schmitt (2007) are profiting more than any other from these new tools. What differentiates Europe from the US? Party political competition in the US If we are observing a revolt of the lower middle class in both the US and Europe, why has the impact been so different up to now? In the US the first-past-the-post system forces everybody to integrate into one of the two major political parties, the Democrats and the Republicans. Both parties therefore represent very large coalitions, which essentially serve an electoral purpose only and cannot be considered programme parties. The fight for content takes place mainly within, among the different caucuses organised in Congress. What you would find in the European Parliament in the EPP, the European Conservatives and Reformists, the Patriots and the Sovereigntists is, in the US, all assembled in one political family, the Republicans. Equally, what you would find in the liberal Renew group, the Socialists and Democrats, the Greens and the Left in Europe has to cohabit within the Democrat Party in the US. The Republican Party can be understood as a broad political coalition which has effectively fallen under the control and leadership of what in Europe might rather be considered the line of Viktor Orbán and the Patriots. The other tendencies are still there but marginalised. They can no longer determine the overall direction but might still be sufficiently strong in Congress to block decision-making or align with the other side when they regard policies as being against their core convictions, such as creating unsustainable debt levels, or on matters related to national security and defence.Europe and its national electoral systemsEuropean states are not immune either. The British, the French and the Hungarian electoral systems provide an oversized seat result for the relatively strongest party, and this increases the opportunities of the extremes. Brexit can be considered one outcome of this. The current political stalemate in France, where the extreme right and the extreme left are holding the system hostage, is another. In systems of pure proportional representation, by contrast, you need more than 50% of the votes for one party or a coalition of several parties to take effective political control. In a first-past-the-post system, as in the US, 20%–30% of the electorate is more than sufficient to take over one of the major political parties and, with that, to potentially run the country. Pure proportional systems therefore provide better protection against a right-wing or left-wing populist takeover. The EU political system On the federal level of the EU on the other hand, the incentives are there for cooperation across the political centre. Decisions in the Council need an oversized qualified majority; the election of a European Commission president by the European Parliament requires an absolute majority of the members elected to the house. These majorities can regularly be found only through cooperation across the aisle and by transcending the traditional left–right schism. The desire to hold important political offices in the EU, therefore, requires a willingness to compromise and forces political parties that are more on the right or on the left to look towards the centre. The final vote on the von der Leyen Commission was carried by a large cross-cutting alliance of the Christian Democrat EPP, the liberal Renew and the Socialists, complemented by the constructive right, centred on Italian Prime Minister Giorgia Meloni, and the constructive left, led by the German Greens. The more radical elements of both the European Conservatives and Reformists and Green groups voted against. The institutional system has a strong impact on the political culture in the EU, which is a culture of cooperation. The political system favours the creation of unity—as the condition for stability on a historically, geographically and culturally divided continent—and therefore the centre. The absence of permanent coalitions and the lack of fixed roles of majority and minority in the division of power in the EU create the opportunity to integrate those on the very right and the very left who are not opposed to the system as such and whose primary aim is not to destroy it: the constructive right and the constructive left. Contrary to the US, where the destructive and anti-system elements can dominate the rest of their respective coalitions, inside the EU that destructive right and left find themselves isolated unless they stop being the system opposition. That is why Ursula von der Leyen was well advised to integrate Raffaele Fitto from Brothers of Italy (Fratelli d’Italia) as vice-president of the European Commission and, at the same time, to continue a constructive dialogue with the co-leader of the Green group Terry Reincke on the importance of climate change policies and actions to preserve the rule of law. Brothers of Italy had not only supported the new asylum pact, in contrast to Viktor Orbán, but had also supported Ukraine in a steadfast fashion, including in the vote to ensure Ukraine profits from the interest on Russian assets. Brothers of Italy is part of the constructive right, stabilising the political system of the EU. Is the EU therefore safe? The EU is a federal union of citizens and states and therefore dependent on support in each and every member state. It is only as strong as its weakest link. Even though, on average, support for EU institutions is close to historical highs and well above the support levels for national institutions, that is not enough (EU 2024). Before Brexit the EU’s weakest link in terms of overall support was the UK. Nowadays its weakest link is France, which is paralysed by the combination of a destructive right, on the one hand, and on the other, a destructive left which, in the form of France Unbowed (La France Insoumise), is holding the socialists and greens hostage. And both extremes are cooperating in the destabilisation of the state. That smells like Weimar. What needs to be done? An agenda for the next phase of European integration An agenda for strength In the worlds of Trump, Vladimir Putin and Xi Jinping, strength is the only thing that counts. Internationally and geopolitically, we are back in the world of nineteenth-century power politics. The rules of the game have changed, and the quicker we understand this the better. We are threatened at the same time from the inside and from the outside. From the inside, by the destructive nationalist populist right and left that are trying to hollow out the political order, established after 1945, based on parliamentary democracy, the rule of law and European integration. From the outside, by aggressive nationalist power politics. And more often than not, these two are connected. The seatbelts need to be fastened. Defending ourselves from threats both inside and outside has to start with the recognition that we are confronted with real issues, not just imagined ones. Hyper-inflation was real and is still stored in today’s price levels. The accumulated inflation during Joe Biden’s four-year term was above 20% (US Bureau of Labour Statistics n.d., author’s calculations), and it will not have been very different in Europe. Growth rates are very low, while debt is rising, and with it the difficulty of states to intervene in times of absolute need. Uncontrolled mass immigration happened. Our capacity to defend our continent is seriously compromised. International respect comes from strength, not from weakness. This is not a case for mass psychotherapy, but political action: the political agenda has to change. The European Parliament nowadays plays a key role in setting the agenda for the upcoming legislative term. Ursula von der Leyen had to negotiate with all the political forces of good will about the programme for the next five years to have any chance of being elected by an absolute majority of the members of the house. The need for the Commission president to negotiate the programme also changes the role of the European political foundations. The Wilfried Martens Centre for European Studies has contributed hundreds of precise policy proposals to the process of reflection in a document entitled The 7Ds for Sustainability. This text centres on defence, debt, digitalisation, demography, democracy, decarbonisation and de-risking globalisation in order to enrich the debate and help set a new agenda (Wilfried Martens Centre for European Studies n.d.). The outcomes of the European elections matter, as they should. With the Greens and the Liberals having together lost more than 50 seats and the so-called progressive majority between the Liberals, Greens, Socialists and the far left having disappeared, European Commission priorities for this legislature have markedly changed. Competitiveness and security, comprising both defence and migration, including border protection, have become the top two priorities. This is underpinned by the different composition of the European Commission and the European Council. With half of the members of both institutions coming from the EPP and the EPP occupying the centre space in the European Parliament as well, concerns about competitiveness, migration and defence, critical to strengthening our continent, which is being challenged from both within and without, now have a stronger voice. An agenda for growth: implementing the Draghi report Like every other policy paper, the Letta and Draghi reports can and are being discussed in detail. But no one can dispute the competence of Mario Draghi in matters monetary and economic. The Draghi report will therefore provide a most important reference point. His report comprises six basic truths that will inspire the legislative proposals of the European Commission in this term, even more so as it was requested by the European Commission president herself. Draghi brings everybody face to face with his or her responsibilities. From my personal reading, his report can be summarised as follows: • Investment is the precondition for future growth. Europe is lagging behind in high-tech investment and has largely lost the new digital economy race. This can be identified as the key reason for the difference in per capita growth between the US and the EU. Mid-tech–based industry, such as the car industry, which provides our current economic backbone, is coming under increasing competitive pressure from China.• Without investment, annual productivity growth falls behind. Europe could maintain and improve its living standard by considerably increasing female and older-age participation in the workplace. Worsening demographics make that quantitative input increase more difficult.• The EU has to return to the strategy of scaling through the development of its own internal market, especially in the less-integrated areas of the service sector.• The Banking Union and the Capital Markets Union are critical to assisting high-tech investors in their efforts to scale beyond national boundaries. Given that high-tech means not only high return but also high risk, venture capital is necessary to accompany that growth.• We have regulated for risk and not for opportunity, as is typical for ageing societies. The regulatory burden has to be reduced.• Common public debt has to come in as a residual answer, dependent in volume on the progress in the above-mentioned areas. Consensus on common European debt could be achieved in the area of defence, which could be considered a European public good. Common European financing would also contribute to more equal burden sharing. An agenda for migration Migration is at the core of right-wing populist parties’ growth. It brings together social and cultural challenges: social challenges in the form of competition for scarce public services and support, and cultural ones in the form of a challenge to traditional constructions of national and cultural identity. Here society is falling apart. What is a promise of improved personal services for the upper middle class and the liberal and green parties representing them is, for the lower middle class, a threat of lower salaries and increased competition for state services, including education. Experiences during the negotiations to form the current Swedish and Finnish governments showed that a tough policy on migration was the one area where populist parties were not ready to adapt or compromise. Preliminary voting analysis from the European Parliament demonstrates that while right-wing populist parties show some diverging views on economics, they clearly differentiate themselves from other political forces on the cultural axis of the political divide (Welle and Frantescu 2025). We have experienced a radicalisation of our political space following the events of mass migration, both in the Mediterranean and following Russia’s aggression in Syria and Ukraine. Russia even actively tries to destabilise its neighbours by transporting refugees to their common borders or via Belarus. Denmark is the only country in the EU that has managed to reduce established right-wing populist parties back to single digits. It has done so by establishing a consensus in society on a tough migration policy that is being continued by its current Social Democrat–led government. At the same time, Denmark represents a country with one of the highest standards of societal development. ‘Going to Denmark’ is even a reference in international development policy. Danish migration policy will therefore need to be studied in more detail so as to understand how far it can provide guidance for the EU as a whole or not. Speedier implementation of the migration pact voted on in the European Parliament in April 2024 therefore has to be a prime priority. But it cannot be the last step. Integration capacity has to become critical to migration policy. An agenda for defence Those who cannot defend themselves are inviting their stronger neighbours to aggress them. A look at maps of Russia over the last 500 years shows us that Russia has expanded continuously at the expense of its weaker neighbours—from basically the city territory of Moscow to becoming the largest state on earth. The military submission of its neighbours is the Russian business model. The peaceful and voluntary integration of the European space, based on the rule of law, is the business model of the EU. These concepts are now geographically colliding. And the grey zone in between, at the very least, is now in danger of Russian aggression and occupation, as demonstrated in Ukraine, where Russia is trying to reintroduce the logic of nineteenth-century empire to the European continent. The US will focus its own efforts increasingly on Asia and the attempt to contain China. Europe will therefore have to provide the lion’s share of its own conventional defence. This can only be effectively organised by making use of the possibilities provided by the EU. The Martens Centre has provided a plan in 10 steps—the European Defence Pyramid—on how to achieve a viable European defence under changed geopolitical circumstances. Starting with more basic ideas at the beginning, it has now been outlined in considerable detail with the help of external experts in The 7Ds for Sustainability – Defence Extended (Ciolan and Welle 2024). Progress is already visible. The Martens Centre suggested the creation of the office of a European defence commissioner and a standing defence committee in the European Parliament. Both are now reality. The proposed increase in financial support for military mobility has now been achieved through the decision of the European Commission to allow the use of regional funds for this purpose. And the new defence commissioner has suggested the creation of an ‘EU DARPA’2 for military research, as developed in the concept papers. Living in dangerous times Europe is being simultaneously challenged internally and externally: internally by right-wing populist parties, which have now conquered nearly 30% of the political space; externally by Russia, which is trying to reintroduce the nineteenth-century rules of empire through military aggression with at least the benevolent acceptance of China. These challenges are not unrelated. Some of the populist parties on the right and left openly make the case for China and Russia. Viktor Orbán’s Hungary has even been rewarded by China with massive investments and the status of an ‘all-weather partner’. Ever since the collapse of the Soviet Union in 1991, we have been living in a world of cooperation. System competition between East and West was replaced by globalisation. System seemingly did not matter anymore. Production went wherever it was the cheapest. Communist China became the capitalists’ best friend in exchange for the transfer of superior technology. In analogy to Lenin, China sold the capitalists the rope with which to hang themselves. The price paradigm replaced the security paradigm. With China now so strong that it can and does challenge the US economically and politically for number-one status globally, and strongly on the rise militarily, this phase has ended. China is preparing for the military strangulation, if not occupation of Taiwan, as demonstrated by its ever more menacing sea exercises around the island every year. Russia waged a war against Ukraine only days after establishing a ‘no limits partnership’ with China, testing the global order established after 1945 when conquering and annexing the territory of a weaker neighbour was outlawed. The West is being challenged both in Asia and in Europe. To defend our European way of life we need to be strong economically and militarily. We need to close the rifts in our societies and constructively end the revolt of the lower middle class. System competition is back, and the security paradigm has replaced the price paradigm. Cite:  Welle, K. (2025). Donald Trump, the revolt of the lower middle class and the next phase of European integration. European View, 0(0). https://doi.org/10.1177/17816858251345566 Footnotes 1. This article is a revised version of an article that originally appeared on the website of the research centre Groupe d’études géopolitiques on 19 March 2025 with the title ‘Trump and the next phase of European integration’. See https://geopolitique.eu/en/2025/03/19/after-trump-the-next-phase-of-european-integration/. Used by permission.2. 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