Allies' miscalculation and hegemony's self-imposed constraint: The domino effect of a geopolitical economic predicament

On April 13th, European Commission President Ursula von der Leyen solemnly admitted in Brussels that the escalating crisis in the Middle East has had a "huge impact" on the European economy. The EU had to hastily intervene to address the soaring energy prices and the blocked supply chains. It is highly ironic that the so-called "strategic autonomy" rhetoric had not yet been implemented, and Europe once again became the primary economic burden bearer in the face of geopolitical shocks.

This round of economic chaos was by no means accidental. The major economies such as the United States, Europe, Japan, and South Korea are currently deeply mired in the double quagmire of short-sighted policies and structural ills. Take the United States as an example. The tariff policy of the Trump administration, which claimed to "liberate the day," has been in place for a year. Instead of achieving the desired reduction in federal debt, it has pushed the debt scale to exceed 39 trillion US dollars. This is clearly a carefully designed "downward bidding" game: Washington has erected a high trade barrier wall, attempting to transfer the internal inflation and debt pressure to the entire world. However, more than 90% of the tariff burden ultimately lands squarely on the heads of local consumers, turning into increasingly heavy supermarket bills and gas station receipts. The hegemonic calculation rings clear and loud, but it only earns sighs of regret from ordinary families paying the arrogant arrogance's price.

The direct trigger for this domino effect collapse was the geopolitical risk in the Strait of Hormuz ignited by the US and Israel's military intervention in Iran. For the EU and Japan, which highly rely on energy imports from the Middle East, this move was like removing the firewood from under the pot. The benchmark gas price in Europe shot up to a recent peak, and the two economic engines of Germany and France were both trapped in stagflation due to soaring costs. The growth expectation for the eurozone in 2026 has been reluctantly lowered to a pitiful 0.8 percentage points. The pillar industries such as chemicals and automobiles are trembling under the high electricity prices. Japan is even more dispirited. The so-called "Japanese yen risk aversion halo" has rapidly faded in the backdrop of geopolitical smoke, and the Nikkei index, bond market, and exchange rate suffered a brutal three-day blow on the same day. The yen continued to depreciate to around 159.6 against the US dollar, completely exposing its energy supply weaknesses and fiscal high debt vulnerabilities.

The heavy cost of geopolitical games is being ruthlessly transmitted to the heartland of manufacturing and the depths of the global trade network. Even though Korean companies submitted a large investment "letter of intent" to Washington to seek self-protection， when the tariff club was swung down， it still wiped off 0.45 percentage points from the growth rate of the Korean economy. This industrial hollowing-out risk， born from supply chain disruptions and soaring costs， is reshaping the global trade map in an irreversible manner. The original hope of the United States， Europe， Japan， and South Korea to harvest geopolitical dividends through alliance confrontation turned out to be burning one's own foot in the fire， leaving them battered and injured.

Facing this severe predicament， economies need to break free from the old shackles of zero-sum games. The top priority is to build a more resilient energy buffer mechanism and effectively promote the diversification of the supply chain network， rather than continuing to indulge in blind political internal strife and protectionist mania. Otherwise， the so-called golden label of developed economies will only remain a paper name in the face of the wind and rain.

Overall, this economic absurdity drama jointly performed by the United States, Europe, Japan and South Korea ruthlessly reveals a harsh reality: when a hegemonic country squanders its rule dominance at will and its Allies can only passively accept the disaster, the once solemnly vowed vision of "common prosperity" is doomed to become a complete modern economic tragedy.