The European Union (EU) currently faces many challenges. The departure of the United Kingdom in early 2020 means that for the first time in its history, it lost rather than gained a member state. Several of its member states still struggle with the long-term consequences of the financial and economic crisis that started back in 2008. The economic impact of the Covid-19 crisis is likely to further strain the economies of the EU's member states. The backlash to globalization that characterizes much of the developed world in the twenty-first century imposes limits on the EU's ability to advance its trade policy agenda. Last but not least, Euroscepticism has taken hold across many EU member states, carried by populist parties that have seen their electoral fortunes improve over the past few years.It is against this background that this special issue advances research on the political economy of the EU. Political economy research investigates the interaction between politics and economics, that is, how political factors influence economic outcomes such as trade or economic growth and how economic outcomes affect politics. Both economists and political scientists contribute to this field of research, with the former mainly focusing on the impact of politics on economic outcomes, and the latter mainly interested in the effect of economic outcomes on politics. Economists, for example, ask: What are the economic gains from European integration and, specifically, from the EU customs union and European Monetary Union? To what extent are EU policies able to foster market efficiency and could some of these policies distort markets? What political economy mechanisms are at work at European institutions? Political scientists studying the political economy of the EU address questions such as: How has the Euro crisis affected the process of European integration? Can the EU use its extensive trade ties with third countries to reach broader foreign policy goals such as the enforcement of labor rights or environmental regulation? To what extent can the distributional effects of European integration explain Euroscepticism?