Creon Butler: Europe must take the lead in reshaping transatlantic relations

The early 2020s were in many respects a high point in post war transatlantic relations. In 2021, the US-led G7 was instrumental in reaching the OECD Global Minimum Tax Agreement and in expanding the IMF’s resources by $650bn to boost global liquidity in the face of the COVID pandemic. In February 2022 the G7 announced unprecedented economic and financial sanctions against Russia following the latter’s full-scale invasion of Ukraine and went on to mount a highly coordinated campaign of economic, political and military support for the victim of aggression.

The transatlantic alliance also had some serious failures, including the chaotic withdrawal from Afghanistan in 2021 and the fact that the Biden administration only partially relaxed the “national security” metals tariffs imposed on the EU and other close allies by the first Trump administration.  The US$370bn of green funding under the 2022 Inflation Reduction Act (IRA) was welcome action by the US government to limit climate change, but as the support could only be accessed by US-based companies, it also created a major distortion in transatlantic trade and investment.

Nonetheless, close transatlantic cooperation to protect common interests and advance multilateral solutions to pressing global problems was the norm. And even where there were internal differences of approach, for example on how far to confront or cooperate with China, the G7 generally managed to reach consensus on a collective approach. Thus, the Hiroshima G7 leaders’ summit in May 2023 for the first time set out the G7’s offer to China on economic cooperation.

Twenty months or so after the inauguration of President Trump for a second term in January 2025, the situation has changed beyond recognition.

President Trump has sought to use access to the American market and dependence on the US for defence to extract the maximum economic benefit (at least as he perceives it) for the US from its closest allies.  US demands have included asymmetric tariff agreements in which a US trading partner has had to reduce or eliminate remaining tariffs on US products while the US has substantially increased its tariffs on the partner’s products.  The US has also demanded that some of its partners make investments amounting to billions of dollars in the US and repeal or refrain from imposing taxes on digital services in their home markets. It has also sought to have the final say over whether its main trading partners can have trade and investment agreements with third countries, particularly China.

The Trump administration has effectively withdrawn or considerably weakened its support for a wide range of global public goods. These include pursuit of net zero, global poverty reduction, monetary and financial stability, energy security and global good governance.

The US administration has also sought to undermine support for democratic values and institutions by overtly backing authoritarian leaders and far right political parties. Most seriously, the President has threatened the territorial integrity of two of the US’s closest NATO allies, Denmark over Greenland, and Canada, which he has said should become the Fifty-first state.

For the EU, UK and other traditional US allies, the approach of the second Trump administration was an enormous shock. Initially they sought to appease the President and minimise the short-term effects on their economies and security interests. They may have thought that Trump would in time be constrained by other centres of power in the US, notably the Congress, federal courts or the states. They may also have hoped that the negative effects of his policies on the US economy, financial markets and diplomacy would at some point lead to a change of approach.

In line with this the UK was the first major economy to settle the President’s “reciprocal” tariff demands in May 2025. It accepted an asymmetric arrangement in which it further reduced its own tariffs versus the US while the US imposed a general tariff rate of 10% on UK goods with tighter restrictions on cars.

The EU is the US’s largest trading partner with an overall volume of trade in goods and services between the two entities of $1.8tn dollars in 2025. As such it was arguably the one trading bloc, other than China, capable of forcing the US to accept an equitable settlement in response to Trump’s initial tariff hikes, particularly if it had been willing to deploy the anti-coercion instrument and retaliate on services trade where the US had a large bilateral surplus.  In the event, however, it also decided to accept an asymmetric tariff agreement for goods in July 2025, effectively prioritising its security interest in maintaining US engagement in the defence of Ukraine.

These agreements are still broadly in place.  But since the start of 2026 the perspective of the US’s traditional European allies has begun to change – from one of minimising short-term economic costs to a greater readiness to think strategically about reducing dependencies on the US over the long-term.

The most important factor in this change was President Trump’s apparent willingness – expressed in January 2026 – to take control of Greenland by force.  There is clearly no value in a defence alliance with a country which is willing to force one of its closest allies to hand over sovereign territory.

Another key factor is the poor judgement demonstrated in the US decision to join Israel in attacking Iran in February 2026.  The result has been the indefinite closure of the Strait of Hormuz which previously accounted for 20% of world oil consumption and an increasing likelihood that the Bab al-Mandeb strait providing access to the Red Sea may also be closed.  The US attacked Iran without consulting any of its European allies, and yet President Trump has frequently demanded European assistance in restoring access to gulf oil and gas supplies.

A third driver has been the extraordinary dominance of the US and China in the development of AI models and in the related investment boom, while at the same time the US administration has shown a readiness to restrict (albeit so far temporarily) all foreign access to the most advanced AI models.  This has led European partners of the US to question whether they can afford to allow their economies to become highly dependent on US technology.

Fourth is the realisation that President Trump does not feel in any way bound to adhere to trade agreements that he has signed.  None of the new tariff agreements have been enshrined in US law and there are several situations where the President has simply ignored his own previous agreements by threatening or imposing new tariffs. In the latest failed negotiations with Canada, the administration sought an agreement which it could effectively cancel at any time.

Lastly, while the US courts have sometimes overruled the administration – most notably by outlawing the initial wave of reciprocal tariffs based on the IEEPA legislation – US allies are increasingly taking the view that there is only a limited chance of the US reverting to its pre-Trump relationships.  The Democrats may take control of one, or even both, houses of congress in November 2026, but even if they are able to pass legislation – e.g. to end the war with Iran – the President will in most cases be able to use his veto.  Meanwhile the President will be able to continue signing Executive Orders that test the limits of his Executive Power with lengthy delays before he is restrained by the courts. He may also ignore subpoenas issued under Congressional investigations.  Even if a Democrat were elected President in 2028, they may be unwilling – or unable – to unwind many key Trump policies on trade and immigration.

But while Europe is finally confronting the need to end its dependent relationship on the US, it has not yet defined a clear course for achieving this.  Decisions are urgently needed by leading European nations on two points.

First, EU member states and the UK, should move as quickly as possible to end the leverage the US currently enjoys through its provision of essential defence and security assistance. This is because President Trump could withdraw from NATO (de facto, if not formally) at any time. He may also try and force Ukraine to accept a peace settlement with Russia which concedes more than is necessary or acceptable, with disastrous consequences for both Ukrainian and broader European security. He could also demand Europe abandon efforts to tax and regulate US tech platforms and the AI industry in areas that were essential for the continent’s security, political stability and long-term prosperity.

Second, the EU should develop its alliance with the Comprehensive and Progressive Partnership for Trans-Pacific Partnership (CPTPP) to become a “third pole” in the global economy.  This would be an economic space – without the US or China – accounting for more than 30% of global GDP and close to 50% of world trade in which WTO rules and other aspects of the global rules based economic system could be fully respected.  The EU could as an alternative pursue a much more limited vision in which it sought to secure its prosperity through a “fortress Europe” approach.  But this would not serve its long-term economic or diplomatic interests.

Incorporating these two key elements in Europe’s future approach to transatlantic relations is the best way to safeguard Europe’s long-term economic and foreign policy interests. But it would also not prevent the emergence of an even stronger alliance between the US and Europe if the US at some point reverted to its pre-Trump outlook on the rest of the world. An alliance built from two broadly equal political entities is likely to be stronger and more resilient than one built around heavy dependence of one group or the other.