Milan Elkerbout: Transatlantic geopolitical and climate change

While transatlantic friction is nothing new – think De Gaulle in the 1960s or the runup to the Iraq war in 2003 – the second Trump administration has seen widely divergent threat perceptions across the Atlantic on both traditional security issues as well as on energy and environment. US threats to Greenland’s (i.e. Denmark’s) and Canada’s sovereignty have forced Europe to reconsider its security provision, while it continues to support Ukraine against Russia’s aggression. The US-Israel war against Iran induced a still evolving energy shock, with traffic through the straits of Hormuz and Bab al-Mandab substantially reduced at the time of writing.

In the area of energy, climate, and trade, more divergences are showing. As the world’s largest fossil fuel producer, the US currently perceives greater threats from the energy transition than from climate impacts, even as the latter causes real costs in the US, from wildfires to knock-on effects on home insurance. A set of back-to-back heatwaves in Europe, combined with the reality that many of its fossil fuel imports come from regions either in direct conflict (middle east) or economic conflict (US trade), keeps the energy transition alive in the EU. Security and competitiveness concerns may keep it from top priority, but EU climate policies continue to be implemented, albeit with less vocal support.

In trade policy, the Trump administration has issued a range of executive actions to implement new tariffs that more than quintupled the average tariff rate. The deal that the US and EU struck in Turnberry in 2025 fixed most US tariffs on the EU at 15%, yet US threats to further raise tariffs in response to EU policymaking continue. One of the points of tension is the EU’s carbon border adjustment mechanism (CBAM). The CBAM extends the EU’s carbon price signal from its domestic emissions trading system to imported goods such as steel, aluminum and fertilizers. Although several countries – the US included – have argued for country-specific treatment under the CBAM, the EU’s border measure does not discriminate between countries. What’s more, some countries can even benefit from CBAM, even when new charges are applied to their imports—and the US is one of them. The carbon intensity of US manufacturing in the steel and aluminum sectors is better than the global average. As CBAM applies to all imports, irrespective of origin, in a covered sector, countries with better than average carbon intensity may see their competitiveness improve on the EU market as others face higher CBAM costs.

This intersection of climate and trade policy may continue to be relevant in transatlantic relations, even if the political winds in Washington DC change. Both Europe and the US consider it strategically important to support their domestic manufacturing industries. Both sides of the Atlantic are also concerned about competition from China in this regard. Several industrial sectors including steel see global overcapacity, with sustained Chinese exports contributing to the glut. This points towards one key difference between the two sides of the Atlantic: the EU’s economic model is geared towards exports markets whereas in the US, strong domestic consumption and the role of the US dollar as the global reserve currency make it a net importer. The EU therefore competes with China’s economic prowess in both home and foreign markets. While the EU – and Canada – may thus seek to diversify their global partnerships in response to US mercantilism, structural interests may limit the extent to which this is feasible. China’s continued support for Russia’s aggression will surely focus minds in Brussels as well. A transatlantic strategy on climate-and-trade policy, where both parties exploit their relatively low-carbon intensity while pursuing both emissions reductions and economic competitiveness goals, could again be attractive in the future—but only in a world where the US is back at the global climate policymaking table.

Beyond the EU-US relationship, relations between the EU and Canada are deepening in the context of common challenges. Ideas such as Canadian associate membership of the EU, that would have been readily dismissed at the start of 2025 are now on the political agenda for the end of 2026. What “associate” means in this context is an entirely different question. Mark Carney’s coalition of middle powers is instinctively attractive to EU countries who fear being swept asunder in the great power game of the 21^st century. Canada’s (as perhaps Greenland’s) critical minerals reserves can play a role here, as they are important for the energy transition and defense industry alike. Yet, such a coalition won’t be able to ignore the actions of the superpowers on critical minerals. The EU’s and Canada’s experience with carbon pricing may prove fruitful for another avenue in plurilateral cooperation: the Open Coalition on Compliance Carbon Markets. With China a member, such coalitions could shape the geoeconomic landscape no matter how the US wishes to engage its traditional transatlantic partners in the future.