Surely enough, barely a week into Donald Trump’s second term as U.S. President, many European officials are alighting at the Panicked and Dazed Station in Trumpland.
While it may have been somewhat understandable when Trump first burst onto the international political scene eight years ago, today, it mainly confirms what he’s always thought of them: that, to paraphrase him, at best, they are weak and meek, and at worst, are mendacious losers who don’t have any fight in them and want to placate the United States to keep free-riding on it.
Even before he was officially inaugurated, Trump’s team attempted to put Europe in a chokehold to paralyze it into submission. They rolled out a trifecta of threats to impose tariffs, pull support from NATO if European tech regulations weren’t loosened, and take over Greenland by force.
It has given Trump and the EU’s adversaries the impression that the power dynamic is lopsidedly in his favor, and that the Europeans, too helpless and dependent on the United States, have only one option: to surrender.
The Europeans’ track record so far supports this perception, but cold facts indicate the EU has powerful economic leverage. Admittedly, using it requires a DNA change. The twenty-seven member states will need to stay united, and accept that the clock has run out and they can no longer avoid negotiating new terms for the transatlantic alliance. This is bound to come at a very high short-term cost too with Trump’s aggressive measures forcing the EU to start de-risking certain aspects of its relationship with Washington. A tall order indeed, but existential crises like the one they are now confronting with the confluence of Trump, Russia and China, have a way of making the improbable possible.
In light of Trump’s demands, these new terms will necessarily entail giving Trump some of what he’s been asking for. But they will also cost him and the U.S. economy, at least in the short term. This will have to mean more European defense spending and a lighter U.S. military footprint in Europe but also a rebalancing of some European investments away from the United States and into the Eurozone, with a short-term benefit for China.
The might of the U.S. economy depends in no small part on Europe in terms of foreign direct investments, arms, and gas exports. European data is also essential for American Big Tech firms. Europeans have been reluctant to use this leverage given their security dependence on Washington and the immediate cost to both the U.S. and EU economies. However, not accepting the short-term cost to build a more stable and balanced long-term alliance will likely result in a much worse outcome over the long run, possibly leading to the demise of the transatlantic alliance.
The numbers are telling and might convince both sides of the compromises needed.
Thirteen EU countries absorbed 50 percent of U.S. liquefied natural gas (LNG) exports in 2023 and 28 percent of all US natural gas exports.
The United States was the single biggest winner in the EU’s diversification of its energy supply since the Russian full-scale invasion of Ukraine, supplying nearly half of the EU’s LNG since 2021. With Russian gas no longer transiting through Ukraine, European demand is on track to increase while prices remain high, making the EU a more lucrative potential market than Asia.
EU countries represented 45 percent of all foreign direct investment pouring into the United States in 2023, according to the U.S. Bureau of Economic Analysis—amounting to $2.4 trillion.
European private savings accounts and businesses invest three times as much in the United States as the next region does. This not only creates and sustains millions of U.S. jobs but also contributes to fueling America’s innovation and industrial edge in its competition with China.
While U.S. Big Tech companies dominate every aspect of Europe’s digital life, they also depend on the continent to fuel their models. Transatlantic data flows aren’t just essential for the continued development of the tech models; they are the biggest in the world and fuel the $7.1 trillion U.S.-EU economic relationship.
Even on the military side, the United States has benefited from Europe’s dependency. More than a quarter of U.S. arms exports went to Europe in the period 2019-2023, up from 11 percent in 2014–18.
The EU and its member states have the numbers to show the Trump team that they might want to be careful what they wish for. Trump is right: Europeans need to change and do more for themselves. But if they must do so while bearing the brunt of a U.S. trade war and reduced security guarantee, it could ultimately mean Europe buying less from—and investing less in—America. Given the lack of readily available alternatives to many American weapons and tech capabilities in Europe, this could benefit China and other third parties, at least in the short term.
Admittedly, the Europeans’ track record isn’t in their favor. Despite it being clear since the Barack Obama presidency that there is bipartisan agreement in the United States on the need to pivot to Asia and review the terms of the transatlantic relationship, the EU mostly wasted more than a decade. It failed to make the industrial and financial investments to keep up with the U.S. economic boom and resisted increasing its defense spending until Trump threatened to destroy NATO during his first mandate.
Given the severity of the challenge posed by China and the anti-Western coalition it is attempting to lead, both sides of the Atlantic have a critical choice to make: They can turn against each other, which will ultimately benefit their adversaries, or they can engage in a tough and frank renegotiation of their alliance, work out their grievances, and set the foundations for decades of new prosperity.
