Europe and the US Are Drifting Apart and It Isn’t Just Because of Trump

BY
JAN BOGUSLAWSKI

Donald Trump is often blamed for the US’s hostility toward the EU, but the roots of the rift run deeper. Europe’s manufacturing-heavy economy and tough regulation of US tech have put it on a collision course with Washington.

 

“It’s been a very productive week,” said EU official Ignacio García Bercero in July 2013, after the first round of negotiations between the United States and the European Union over the Transatlantic Trade and Investment Partnership (TTIP). At the time, the deal was supposed to be the largest bilateral trade agreement in history. But TTIP never materialized, and it has long since been abandoned. Today, twelve years later, the political climate that made such a deal conceivable feels like a distant memory.

In August, Donald Trump and European Commission president Ursula von der Leyen struck a “truce” in Scotland to scale back US tariffs on European imports. The deal set a new 15 percent baseline tariff on most EU goods, coupled with EU commitments to buy American fossil fuels, invest in US strategic sectors, and scrap any counter-tariff measures and trade barriers for American products entering the European market.

While the agreement is still preliminary and many details remain unsettled, it already represents a visible setback for an economy whose largest export market is the United States. Compared to the pre-Trump status quo, the deal cements a turn away from trade liberalization and toward protectionism in the transatlantic partnership.

How did Europe and the United States go from negotiating the most comprehensive free trade deal in history to embracing protectionism in little more than a decade? While it is tempting to attribute this new opening simply to Trump’s return to the White House, recent events unfold against the backdrop of deeper structural tensions.

Two Contrasting Growth Paths

The EU and the United States were central architects of post–Cold War globalization. This enabled their corporations to reap gains — often at the expense of the Global South — through the dominance of the World Trade Organization, International Monetary Fund conditionalities, and the protection of strategic industries that kept developing economies tied to low-value production. Still, the two blocs have always followed distinct economic models that were once largely complementary but have lately become a source of friction.

In the United States, economic power has long gone hand in hand with global hegemony, built on the military-industrial complex, reinforced by the dollar’s role as world currency, and more recently extended through the dominance of its tech giants. Domestically, US growth has been powered above all by debt-driven domestic consumption, with services, mostly finance and tech, thriving as the industrial base declined and inequalities skyrocketed.

The current geopolitical turn — driven by China’s rise and underscored by Russia’s aggression against Ukraine — has put the US-EU relationship under strain.

Europe’s trajectory was different. Foreign policy predominantly followed economic interests, particularly those of Germany as a “trading state” guided by the Wandel durch Handel, “change through trade” doctrine. Europe did not undergo the same scale of deindustrialization, as Eastern enlargement absorbed much of the offshoring of the 2000s, allowing the EU to retain a strong industrial core in cars, machinery, chemicals, and pharmaceuticals, as well as consumer goods and luxury items that were then exported across the world. Europe’s external weight has rested more on “orthodox” trade and symbolic capital than military power, global currency, or vast capital markets.

At the height of Western power such differences between Europe and the United States were manageable. But the current geopolitical turn — driven by China’s rise and underscored by Russia’s aggression against Ukraine — has put the relationship under strain. The Scotland deal is the clearest evidence of this shift in mood. It required von der Leyen to accept terms that leave EU producers worse off than before Trump’s tariff war and exposed her to sharp criticism at home.

Understanding how this inflection point came about requires looking at how the broader geopolitical turn has disrupted the preexisting EU-US balance. And the first point here hardly needs restating. After Russia launched its full-scale invasion of Ukraine in 2022, security suddenly became the scarce and costly good — and only the United States could provide it, as Europe’s post–Cold War order had prioritized the “peace dividend” over defense.

This tilted the balance of power toward Washington, giving America leverage to demand a higher premium in other areas, including trade. Trump was quick to exploit this amid the long-standing frustration in Washington at being tied down in Europe rather than pivoting to Asia. As European Commission vice president Maroš Šefčovič hinted after the Scotland talks: “I cannot go into [all the] details, but I can assure you it was not only about trade.”

The Second China Shock

The key silent “actor” of the EU-US deal is China, whose rise is the main force driving the current geopolitical turn. The People’s Republic’s evolution from a poor nation to the world’s manufacturing hub has led to vast industrial surpluses that are now reshaping global supply chains. Washington and Brussels have reacted to this development in different ways. The United States has leaned toward outright “decoupling” (remember how Biden kept Trump’s China tariffs?) while in Europe the softer idea of “de-risking” gained ground.

The contrast is visible in trade flows between nations. Since 2018the United States has managed to cut some of its dependence on Chinese imports and adopted a consistently hard line, while Europe’s imports have grown, and its trade deficit with China deepened. Aside from tariffs on electric vehicles, Brussels has avoided explicit anti-China trade barriers. This has frustrated Washington. Trump’s recent Truth Social post captures it neatly: in the same breath he accused NATO — by which he meant the EU — of still buying Russian oil and demanded it impose tariffs on China.

But Europe’s softer stance here does not simply boil down to its policy preferences. It is rooted in the structural features of its economy. In the United States, cutting ties with China is easier. The services-based American economy has been more of a buyer than a seller in this relationship anyway, and it’s simpler to switch suppliers — say, to Vietnam — than to replace export markets. Add to that a more centralized governance, and the long-standing relevance of the “geopolitics over economics” paradigm in Washington, and the result is a system more capable of a clean pivot.

In contrast, the EU remains more export dependent, in part because “the first China shock” of the early 2000s was softer on the continent than in the United States.  Within the EU, manufacturing accounts for a greater share of jobs and output than it does in the United States. And now, Europe’s manufacturing strength is increasingly under pressure, as a second China shock unfolds in sectors far more central to its economy — a consequence of China moving sharply up the global value chain beyond the low-end goods it specialized in throughout the early 2000s.

Sweeping tariffs are harder to deploy for Europe because its relationship with China runs both ways.BYD cars are sold in Berlin, but Volkswagens also make their way to Beijing.

The clearest example is China’s dominance in solar panels, but the change applies to “old” industries as well. Car exports are the classic example: China jumped from one million in 2020 to six million in 2024, while Germany’s figures barely moved, staying at around three. This strikes at the core of Europe’s industrial model.

Sweeping tariffs are harder to deploy for Europe because its relationship with China runs both ways: BYD cars are sold in Berlin, but Volkswagens also make their way to Beijing. European firms embedded in China-centered supply chains and flows of Chinese inputs feeding EU production are therefore vulnerable. China is now the EU’s third-largest export market after the United States and the UK. Faced with intensifying competition and shrinking margins, some industries (and, by extension, governments) are increasingly tempted by the logic of “if you can’t beat them, join them.” A case in point here is the Chinese EV tariffs. Germany, where industrialists in the car sector traditionally hold a strong grip over policy, voted against them, in part to protect their own car plants inside China.

The Chinese dilemma in the EU is therefore sharper, and arguments for cooperation stronger. The old spirit of “diplomacy through trade,” though badly weakened since 2022, is far from dead. On top of that, the EU is a union of twenty-seven states with often conflicting interests — divisions that Beijing has learned to exploit — which helps explain why the bloc’s policy toward China has failed to align with America’s interest.

EU Digital Regulation, US Backlash

Ironically, the one arena where Brussels has really become more geopolitically minded is the very one Washington would rather keep off the table: Big Tech.

Historically, Europe’s export-oriented economies — with limited venture capital, stronger labor protections, and an emphasis on incremental and patient innovation rather than “creative destruction” as in the United States — put little priority on scaling software and consumer tech firms. This translated into a market largely left open to US platforms. Europe’s biggest tech company, Germany’s SAP, illustrates this well. Its specialty is enterprise software for managing industrial production and supply chains which means it represents the “old” economy rather than consumer platforms or digital services. This is why when you look at trade in services rather than goods, the balance tilts in favor of the United States.

In recent years it has become clear that the digital sphere is not just another industry, but a domain that shapes politics, security, and social cohesion. As recognition of this has grown in Brussels, the EU has moved to strategically fund its own digital sector while also doubling down on regulation to curb the free rein of foreign tech giants. In the 2020s, the EU adopted two major laws, still in the process of being rolled out in full: the Digital Markets Act, aimed at curbing monopolistic practices by big platforms, and the Digital Services Act, which requires them to police harmful and illegal content. This unfolded alongside several high-profile antitrust cases against Google, Apple, Facebook, and Amazon. Europe has also been pushing back on taxation, debating digital taxes in response to the long-standing “Ireland problem”, where firms book global profits through Dublin to minimize levies.

In recent years it has become clear that the digital sphere is not just another industry, but a domain that shapes politics, security, and social cohesion.

These measures don’t endanger US tech giants critically, but they matter given Europe’s place as the world’s second-largest consumer market. And they have already provoked US retaliation, including Trump’s tariff threats: “Digital taxes, legislation, rules or regulations are all designed to harm, or discriminate against, American technology,” he wrote on Truth Social.

With Big Tech’s enormous political clout in Washington — amplified further by the AI race — defending these firms has become a top US policy priority. The stakes are high enough that Washington has allegedly considered sanctions against European officials driving regulation. In this way, conflicts over digital power have become yet another source of tension, contributing to the drift reflected in the Scotland deal.

Europe Between Trump and Itself

The forces driving the EU and the United States apart are bigger than Trump. That said, the deal should not be seen as signaling an end to relations between the bloc and America.

What is clear from the EU side, however, is that Trump’s actions give credence to the position of those like the French president Emmanuel Macron who have been critical of the United States since at least 2022 and have gone as far as to call for “strategic autonomy,” i.e., strengthening Europe’s self-reliance most critically in security, but also in trade. In trade, this essentially means diversifying beyond the Washington-Brussels-Beijing axis, in what the think tank Bruegel has called “using partnership as the best offensive tool.” The biggest step in that direction is the long-delayed Mercosur accord with several Latin American economies, alongside renewed talks on deeper engagement with Canada, Japan, or Australia.

 

The caveat is that trade deals empower some industries but undercut others. Even though negotiations with Mercosur have been concluded, the deal still requires the approval of member states, and France has long opposed it over concerns that agricultural trade would undermine the position of its farmers; Poland, Austria, and the Netherlands are critical of the deal for similar reasons. Complicating matters further, talks are beginning on the EU’s next seven-year budget, expected to trimhistorically crucial agricultural subsidies (the CAP) as pressures mount in areas like innovation, tech, and defense. Whatever Brussels strategists may envision for their dealings with Trump, their response to China, or their attempts to forge new partnerships, they will still need to put in heavy political work to bring member states and their populations on board.

https://jacobin.com/2025/10/trump-von-der-leyen-trade-tariffs-china-tech

 

 

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