The trans-Atlantic relationship between the United States and European democracies has undergirded international order and prosperity since the end of World War II. But the long-term health of this historic relationship is increasingly in question.
On paper, the relationship generally appears strong and stable.
Trade relations remain robust. In 2023, the U.S. exported $592 billion in goods and services to the European Union and imported $723 billion from the political union. In 2022, U.S. foreign direct investment in the EU amounted to $2.7 trillion, and EU foreign direct investment in the U.S. stood at $2.2 trillion. This trade and investment creates a lot of jobs and prosperity on both sides of the Atlantic. Yet while the benefits of mutual trade access and engagement have been proven over many decades, growing problems lurk close below the surface.
Take the Biden administration’s Inflation Reduction Act. That legislation provided significant subsidies to U.S. electric car manufacturers, leading all of the EU’s 27 member states to complain that the act promotes unfair protectionism. The U.S. has its own complaints about protectionism. Consider how the EU has pursued a nakedly protectionist policy of targeting major U.S. technology companies in recent years. While the EU says these measures seek to enforce compliance with EU laws surrounding data protection, advertising, and competition, the multibillion-dollar fines that have been imposed on U.S. companies indicate that revenue generation is another key motive.
These EU actions are also designed to provide greater support and market benefits for European technology firms that lack the competitiveness of their American counterparts. There is also little question that the EU’s general disdain for robust U.S. free speech protections under the First Amendment is leading to a litigious stance toward American social media companies, such as Facebook and X. Top EU officials openly admit as much, apparently unconcerned how their stance will be met by the vast majority of Americans who still treasure the First Amendment.
Whether Vice President Kamala Harris or former President Donald Trump takes office in January 2025, the next president will have to grapple with the complaints of U.S. technology companies, the crown jewels of the U.S. economy, that they are being treated unfairly in Europe. Escalating tensions seem all but certain.
Technology poses another challenge in the U.S.-EU relationship. Namely, in relation to China.
Both the Biden and Trump administrations have put significant pressure on European governments to restrict their best technology firms from exporting high-tech goods to China. Their fear, a very legitimate one, is that China will use these imports to strengthen its military and improve its means of killing Americans in any future war.
The Dutch ASML semiconductor chip manufacturer offers the primary example here. A world leader in its field, the firm generates large amounts of revenue from the Chinese market. But U.S. pressure on the Netherlands has seen increasing restrictions on ASML’s ability to export higher-grade chip-making machines to China. While this development has been manifestly positive for the U.S., being that China has used its ASML imports to advance its military and intelligence service capabilities greatly, ASML and some in the Dutch business community have been frustrated by their lost earnings. And by what they perceive as excessive U.S. influence contrary to the Dutch national interest. While China’s aggressive espionage policy toward the Netherlands undercuts this argument, there is a general perception in Europe, not entirely unfair, that the U.S. acts too arrogantly on tech export matters.
China looms large in terms of the future U.S.-EU relationship.
The U.S. identifies China as its preeminent adversary, a new Cold War behemoth that is determined to displace the post-1945 democratic alliance structure and its rule of law-based trade engagements. Most U.S. military and intelligence analysts also expect a Chinese invasion of Taiwan before 2030. At this very moment, Chinese coast guard vessels are escalating aggressive behavior, such as ship ramming and flare drops, against vessels and aircraft from the Philippines. They are doing so within the Philippines’s exclusive economic zone. The Philippines is a U.S. treaty defense ally a la Japan and NATO.
Problematically, however, the EU and the United Kingdom have been highly reticent to offer more than cautiously condemnatory rhetoric in the face of this overt Chinese challenge to the peace and prosperity of the South China Sea. Waters that account for $3 trillion in annual trade flows. The U.S. hoped for far more regular European naval deployments to the South China Sea so as to signal a common Western intent to deter China from its growing aggression.
Instead, while increasing in number over recent years, European naval deployments very clearly remain calculated toward avoiding Chinese ire. In 2021, for example, Germany begged China to allow one of its warships to pay a port visit to Shanghai after its South China Sea transit. Recognizing Berlin’s weakness, Beijing rejected the request. This appeasement policy toward China is hardly a secret. Indeed, reflecting their deep penchant for appeasing Beijing, European nations continue to tolerate very thinly veiled Chinese military support for Russia’s war against Ukraine.
The EU’s two most powerful member states, France and Germany, are of particular concern here. French President Emmanuel Macron has even opened the door toward high-tech cooperation with China. German Chancellor Olaf Scholz has similarly made clear that he wants to double down on appeasing Chinese leader Xi Jinping in an attempt to retain German export access to China. This has led to German opposition to EU efforts to confront Chinese electric vehicle dumping into the European market. While European Commission President Ursula von der Leyen has taken a more hawkish stance, hers is a rather solitary one.
Then, there’s the European security conundrum.
The U.S. intelligentsia consensus is that European nations are now doing their fair share in terms of defense spending within NATO and support for Ukraine. Unfortunately, these assertions don’t withstand close scrutiny. Germany, the EU’s largest economy, has significantly scaled back planned defense spending increases. The country is also cutting military aid to Ukraine. That Germany is pursuing this policy course amid Trump’s prospective return to the Oval Office is very telling. It proves that Scholz was full of something other than truth when, following Russia’s February 2022 invasion of Ukraine, he pledged a vigorous new approach toward taking a lead for European security. And while Macron has boosted French defense spending and support for Ukraine, he has done so as part of his explicit “strategic autonomy” vision to distance Europe’s foreign policy from that of the U.S. This vision is plainly designed to appeal to Beijing’s interest in a growing foreign policy separation between the EU and the U.S.
More broadly, there is a general strategic separation between the EU and the U.S. in terms of perceived threats and associated solutions. Writing recently, the influential head of the Munich Security Conference, Wolfgang Ischinger, argued against a robust U.S. stance toward China. Claiming, falsely, that European nations have now basically met their NATO defense spending responsibilities, Ischinger then summoned the gall to claim that the EU, which utterly excuses China’s grotesque human rights record in places such as Xinjiang (again, in fear of damaging trade relations), plays a superior role to the U.S. in terms of its defense of global human rights. If Ischinger wants to understand why his words carry such little weight on the American political Right, he need only look at why Poland’s influence is so comparatvely ascendant.
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The problem is clear. If the EU wants to appease China, and the U.S. is determined to confront China’s evident security challenge, how can the two find common ground as China’s aggressive ambitions grow? And as too many in the EU continue to regard the U.S. as the easy piggy bank for NATO’s defense, how can American politicians expect to retain popular support for this most critical alliance?
The solution may be simple: an increasing U.S. reprioritization away from the traditional U.S.-EU bloc relationship toward closer bilateral relationships or small group relationships with European states such as the Baltics, Poland, Finland, and the U.K. But the status quo is plainly unsustainable.