European cities in 2025 find themselves at a critical juncture, aspiring to the promise of “smart” urban living while grappling with a confluence of powerful global forces.
From the ongoing war in Ukraine and transatlantic uncertainty to the intensifying U.S.-China rivalry and the resurgence of protectionist trade policies, these macro-level shifts are not abstract concerns but tangible headwinds buffeting urban centers.
The ambition to weave digital technologies seamlessly into the fabric of city life, enhancing efficiency and sustainability, now collides with the imperative of geopolitical resilience and economic security.
As cities strive to become showcases of innovation and green transformation, they must navigate strained technology supply chains, turbulent energy markets, and the delicate balance between economic prosperity and strategic autonomy.
Supply chains and security
The very foundations of the smart city – its interconnected sensors, intelligent infrastructure, and data-driven services – rest upon a reliable supply of advanced technologies, particularly semiconductors and critical raw materials.
Yet, Europe’s dependence on global value chains, especially for semiconductor manufacturing in Taiwan and South Korea, leaves its urban technology ecosystems vulnerable.
The U.S.-China technology war, with its escalating export controls and drive for technological supremacy, further complicates matters for European cities seeking to build smart infrastructure. While the EU’s Chips Act aims to bolster domestic semiconductor capabilities, its success hinges on massive investment and overcoming cost disadvantages.
Similarly, the green transition underpinning smart and sustainable cities is heavily reliant on critical raw materials (CRMs) essential for batteries, electric vehicles, and renewable energy technologies.
The EU’s significant import dependence, often concentrated in China, presents a strategic vulnerability. As cities implement “Local Green Deals” and invest in clean energy infrastructure, the reliability and diversification of these CRM supply chains become paramount.
The EU’s Critical Raw Materials Act seeks to address this through domestic capacity building and diversified partnerships, but the journey towards supply chain security is long and fraught with challenges.
Green dreams meet geopolitical realities
The European Green Deal, the overarching framework for sustainable urban development, faces significant tests in the current geopolitical climate.
While the energy crisis spurred by the war in Ukraine initially accelerated the push for renewable energy adoption in cities, the reliance on China for key green technologies like solar panels and battery components creates new dependencies.
The cost competitiveness of Chinese manufacturers poses a considerable hurdle for European cities trying to prioritize local or regional sourcing for their green infrastructure projects.
Furthermore, international climate cooperation, essential for addressing global environmental challenges, is strained by geopolitical rivalries.
The EU’s Carbon Border Adjustment Mechanism (CBAM), a key tool to prevent carbon leakage, faces international opposition, potentially isolating the EU and complicating the path towards shared climate goals.
For smart cities aiming to lead in sustainability, navigating these international tensions and ensuring access to affordable and secure green technologies is a critical balancing act.
Economic headwinds and priorities
The ambitious visions of smart and sustainable cities require substantial financial investment, a significant challenge in an era marked by economic uncertainty and competing priorities.
The tariffs imposed by the U.S. in early 2025, even with temporary pauses, pose a direct threat to European economic growth, potentially diverting resources and political attention from long-term green and digital transformation projects in urban areas.
Increased defense spending in response to geopolitical instability further strains public finances, creating difficult choices for city administrations when allocating budgets for smart city initiatives.
While EU-level funding mechanisms exist, cities must also attract private investment to realize their smart city ambitions. However, the volatility in global foreign direct investment flows and increased scrutiny of investments from certain countries, particularly China, add another layer of complexity.
Cities actively seeking to foster local tech ecosystems and implement innovative smart solutions must compete in a global landscape where investment decisions are increasingly influenced by geopolitical considerations.
Efficiency, resilience, and autonomy
At the heart of the smart city challenge lies the fundamental tension between pursuing technological solutions for efficiency and ensuring resilience against external shocks. Cities have long embraced digitalization to optimize services, manage resources, and enhance the quality of life for their citizens .
However, the current geopolitical environment underscores the need for a more strategic posture, one that prioritizes security and autonomy alongside efficiency gains.
This necessitates a shift towards implementing EU strategic autonomy frameworks at the local level. Cities must foster local tech ecosystems, support targeted innovation in areas where Europe can build a competitive edge, and enhance the resilience of their critical infrastructure.
Collaboration between local industries, research institutions, and city governments is crucial for developing and deploying smart city solutions that are not only efficient but also secure and sustainable in the long term.
Strategic imperatives for urban futures
Navigating this complex era demands that European cities adopt a more strategic and proactive approach. Enhancing supply chain monitoring and diversification, boosting investment in resilient digital and energy infrastructure, and fostering targeted skills development are essential steps.
Cities should also strengthen local ecosystem collaboration and pursue proactive international engagement through “city diplomacy” to build diverse partnerships and attract resilient investment.
Developing internal geopolitical foresight capacity will be increasingly crucial for cities to anticipate risks and opportunities in a rapidly changing world. By acting as conveners, fostering innovation, and strategically aligning with EU-level objectives, European cities can transform themselves from vulnerable nodes in global networks to resilient centers of technological and sustainable progress.
The path forward requires a fundamental shift in urban governance, one that embraces strategic thinking and adaptive capacity to thrive amidst the ongoing geopolitical and economic turbulence.
