What the US loses without the EU

Under the Trump regime, the relationship between the European Union and the United States has crossed the proverbial Rubicon. The spirit of partnership has been replaced by contempt. Diplomacy has been replaced by barbed confrontations. Cooperation has been replaced with opposition, competition and defiance. The trust between the once fervent allies is now broken and its reparation seems unlikely, at least for as long as Trump remains in power.

President Trump views Europe with trepidation. In his mind, Europe has “free-loaded” under America’s security umbrella for decades and “ripped-off” America in trade.

Trump views the EU as a bureaucratic globalist that undermines national sovereignty. This is why he supported Brexit and encouraged other European nations to follow suit. The EU’s strict regulations on American tech giants like Google, Facebook and Apple fuels his contempt. Trump sees this as unfairly edging-out American companies.

The first bullet was fired by Trump. He imposed tariffs on EU steel & aluminum, autos & auto parts, wines & spirits. He then suggested that US support for its NATO allies would depend on their financial contributions. All these stoked the fires of uncertainty about American commitment to collective defense.

Trump’s much publicized treatment of Volodymyr Zelensky in the White House and his parroting Putin’s talking points on the Ukraine war underscored the fact that America and the EU are now on separate paths with opposing values.

America’s aggressive tariff policies towards the EU triggered widespread antipathy towards America whilst igniting a revival of nationalism among the nations affected. It pushed the world to aim for strategic autonomy and aggressively forge trade and security alliances among themselves, excluding the US.

What will it mean for the US if it loses the EU as a close ally?

The losses far outweigh the benefits. Here are the ways in which America loses.

Debt financing. America spends more than it earns. In 2024, America’s budget deficit was a staggering $1.83 trillion. What allows the US to maintain massive deficit spending for successive years is its ability to tap a steady stream of lenders ready to purchase US treasury bonds. US bonds remain attractive since 58 percent of global reserves are denominated in US dollars. It is also the default currency for international trade. These make the US dollar a safe bet.

If European nations (and others) dump US treasury bonds on a large scale, it will result in a depreciation of the US dollar, a spike in interest rates and a drop in US bond prices. All these will trigger turmoil in US capital markets and the American economy at large.

The Europeans can inflict more pain by pulling out its holdings in US companies and financial institutions.

Loss of sanction leverage. The fact that the US dollar is the default intermediary currency allows the US to impose sanctions on countries it considers rogue. It can freeze dollar assets, cut off nations from its financial system and ban them from using the SWIFT system.

This advantage will be lost if the US dollar ceases to be the dominant global currency. As it stands, there is already pressure from BRICS nations to trade in currencies outside the greenback.

Loss of its European-based arms network. Since Trump insists on being transactional, imagine what would happen if the EU demands rental for the land in which more than 100 American military bases are located across Europe. The sheer cost will compel the US to close the majority of them. Imagine too if the EU levies a toll fee for American military navigation on European waters and/or airspace. Again, sheer costs will weaken America’s military advantage.

And then there is European purchases of US-made arms amounting to some $68 billion annually. This amount will be lost as the Europeans source their weapons and munitions from alternative suppliers. Not only will American arms manufacturers like Lockheed Martin, Raytheon Technologies and Northrop Grumman lose the revenues to remain viable, they will also lose the economies of scale needed to invest in research and development. This will have long-term effects on American defense superiority.

Loss of intelligence access. Although the US spends some $106 billion on intelligence annually, the US can never have eyes on the entire world. It needs partnerships like the five eyes group (an intelligence sharing bloc between the US, UK, Australia, New Zealand and Canada).

As America becomes more isolated from Europe, it will lose access to the formidable intelligence networks of Germany, France, Spain and Italy, among others.

Access to the European market. Although the EU market consists of only 449 million consumers, it is a market with tremendous buying power. Retaliatory tariffs from the EU will prevent American goods from competing on an even playing field. This puts in jeopardy America’s exports to Europe worth $376 billion.

Tariffs aside, resentment towards Trump’s policies has triggered widespread boycott of American goods. This too will further diminish American exports.

America to be deprived of EU products. Europe is a world leader in industrial chemicals, precision equipment, advanced materials, semiconductor equipment, etc. Although the US will still be able to import these, tariffs will make them more expensive for American manufacturers. The end result will be an erosion of American manufacturing competitiveness.

No doubt, Trump’s tariff spree and security policies towards Europe will yield some gains for America. Among them are tariff income, protection for American manufacturers, savings on defense spending, among others. But it comes at an enormous cost. Not only will it put the US on a long-term economic disadvantage, it will also cause America to lose its hegemonic power over Europe and, by extension, the rest of the word.

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Email: [email protected]. Follow him on Twitter @aj_masigan