The EU elections are taking place amidst a backdrop of ongoing disputes with China, a 'greenlash,' and the possibility of a return of President Trump.

• The EU has been walking a tightrope regarding its links with China.
• The EU's executive arm, the European Commission, is predicted to reveal new tariffs on Chinese electric vehicles following the election.
• The outcome of the transatlantic relationship remains uncertain due to the upcoming U.S. elections in November.

The political landscape of the European Union is set to shift as voters in the 27 member states cast their ballots from Thursday to Sunday.

As far-right party support increases, analysts predict that the bloc will adopt more protectionist policies, with a decrease in climate targets and an increase in defense spending.

The significance of this election for Europe and the world is examined by CNBC.

Relations with the U.S.

The election of U.S. President Joe Biden in 2020 was met with widespread approval from European Union lawmakers and officials, who viewed it as a positive shift in the transatlantic relationship. Prior to this, European officials had faced numerous challenges from the previous administration, led by Donald Trump, which imposed trade tariffs, disputed climate commitments, and shocked mainstream politicians with its confrontational approach.

The outcome of the U.S. presidential election in November remains uncertain, and thus, the future of the transatlantic relationship is still unclear.

Despite the EU's reliance on the U.S. for defense, Trump has indicated that he may not provide protection to NATO countries if they fail to meet their membership obligations. Furthermore, the delay in approving new financial aid for Ukraine has raised doubts about the U.S.'s long-term commitment to the conflict.

The upcoming policymakers in the EU are predicted to boost defense spending and enhance cooperation among themselves.

Relations with China

The EU's executive arm, the European Commission, is predicted to reveal new tariffs on Chinese electric vehicles following the election.

The EU has been walking a tightrope regarding its links with China.

While Brussels views Beijing as a strategic competitor, it also seeks to maintain collaboration on climate and geopolitical issues.

Green pledges

The EU, having been hailed as a global leader on climate change after the 2019 elections, now faces the possibility of scaling back its ambitious climate policies with the arrival of more climate-skeptic politicians in Brussels.

Analysts at Citi warned in a research note in late May that the shift to the right in the EU Parliament could slow down further environmental legislation and potentially weaken existing agreements, such as the phasing out of conventional cars by 2035.

They suggested adding more support for nuclear power or fracking for cheaper and more reliable gas.

Ukraine's future

As a result of Russia's invasion of Ukraine, Kyiv is seeking membership in the European Union and official negotiations may begin this month.

The question of how much the EU will need to adapt to accommodate new members, including Ukraine, is already being posed, even though the process may take many years to complete.

The EU may need to adopt a qualified majority to make decisions, as it becomes increasingly difficult to achieve consensus with more member states.

Analysts from Citi predict that if Ukraine joins the EU, it could result in a significant change in net contributions, potentially causing disruption among countries that currently receive funding from the EU budget.

The analysts predicted that a larger Eurosceptic presence would hinder the implementation of reforms that could complicate enlargement.

'It's the economy'

In March, a survey conducted across Europe revealed that the economy, social justice, and job opportunities were the top priorities for the future of the continent.

Despite the inflation crisis that plagued the bloc in 2023, the economy is slowly recovering.

In a May research note, Goldman Sachs stated that the EU faces three significant challenges: a declining demographic trend, lower industrial investment compared to the US, and sluggish productivity growth.