This year, Brussels—at the heart of European policy-making—hosted the 4th Transatlantic Forum on Geoeconomics on 30 September 2025. The discussions centred on transatlantic priorities, framed by escalating geopolitical tensions and growing economic volatility. The agenda drew heavily on high-level exchanges, most notably with US Ambassador to NATO Matthew Whitaker and EU Trade Commissioner Maroš Šefčovič, who brought both candor and nuance to their respective fields.

“America will protect every inch of the Alliance’s territory.”

Ambassador Whitaker sent a clear signal of enduring American commitment to NATO’s collective defense, insisting that “every inch” of the Alliance’s territory will be protected. He described how sustained diplomatic engagement had moved President Trump to a position of robust support for Ukraine’s sovereignty, emphasizing that a united front is needed to impose real costs on Moscow. Recent Russian drone incursions into NATO airspace—over Poland and the Baltic countries—were cited as stark reminders of persistent threats, but also as proof of the Alliance’s responsive capabilities and deterrence posture. Whitaker voiced frustration, however, that some European allies still “drag their feet” on defense spending, warning that failing to reach the newly established 5 percent GDP benchmark could undermine both credibility and deterrence. For Whitaker, a secure Alliance is inseparable from balanced burden-sharing—an aspiration now hard-wired into the “Hague defense commitment” but requiring vigilance to ensure meaningful year-over-year increases.

“Fostering a climate for innovation will be key to both economic and security resilience.”

On the European side, Commissioner Šefčovič reflected on a fundamental transformation: Europe, he argued, began as a peace project but is now compelled to reassess its security and defense posture amid rapidly shifting geopolitical realities. He stressed the importance of treating the US as a strategic partner—not only by stepping up defense investment, but also by making Europe’s own defense sector more attractive to investors. Echoing Whitaker, Šefčovič acknowledged that without sustained economic growth, it is simply not possible for any government to invest 5 percent of GDP in defense—and that fostering a climate for innovation will be key to both economic and security resilience.

Some panels focused on trade and tariffs. The participants agreed that the current moment marks the beginning of a “new chapter in trade,” characterized by ongoing uncertainty and drastic shifts in global goods traffic. New US tariffs would force Europe to rethink its supply chains. In addition, Europe would have to carefully consider how much of its steel industry it would allow to migrate to China. Anahita Thoms, Partner, Head of Germany’s International Trade Practice, Baker McKenzie, made it clear that “tariffs hurt, but uncertainty destroys” and that a return to the old global trade order was not to be expected. Instead, Europe must diversify its trade relations, for example through new agreements with Mercosur, while at the same time stabilizing and deepening transatlantic economic relations, the panelists emphasized.

„Deep partisan devide is a real internal threat of the position of the US dollar.“

Another thread running through the Transatlantic Forum was the question of the US dollar’s global standing. Both American and European speakers noted that the dollar’s supremacy now faces internal threats from the ideological split in American politics. ‘We don’t really know when the decline of the US dollar started,’ said Selesha Mohsin, Bloomberg’s senior Washington correspondent. „Deep partisan devide is a real internal threat of the position of the US dollar.“ This has sparked a broader European reevaluation of payment systems and a search for greater financial sovereignty, with calls to create new platforms less exposed to external shocks.

„Europe is the only world region where the demand for energy has declined which is a sign of deindustrialization.“

In the critical field of energy, the Transatlantic Forum stressed that Europe is unique as the only major region experiencing declining demand. Andrew Puzder, the new US ambassador to the European Union, said: „Europe is the only world region where the demand for energy has declined which is a sign of deindustrialization.“ This trend, conference voices emphasized, must be confronted if Europe is to avoid long-term erosion of its industrial base and safeguard energy security.

„The AI race is decided by capital and talent.”

Finally, the discussion turned to artificial intelligence and digital competitiveness. Europe’s lag in generative AI adoption was framed as both a challenge and a call to action. „Only 37 percent of German companies use generative AI“, said Michael Hüther, Director & Member of the Presidium, German Economic Institute (IW). „AI is important for Germany to come back to the mid range of economic groth“, he stressed. And Jens Wiese, managing partner at Leitmotif, added: „The AI race is decided by capital and talent. European companies would be illed advised to sacrifice the transatlantic ties by trying to search more AI opportunities in China“.

The speakers at the Transatlantic Forum agreed that closing this gap will require pragmatic regulation, capital investment, and—most importantly—retaining the strength of the transatlantic relationship rather than seeking shortcuts in collaboration with other players. For now, only the US possesses the scale and dynamism needed to lead in AI, highlighting the limits of Europe’s fragmented financial markets.

Throughout the 4th Transatlantic Forum, the message was clear: the challenges of security, economic competitiveness, innovation, and resilience can only be met through renewed transatlantic solidarity—anchored in both shared values and real investment on both sides of the Atlantic.

Briefings on the Conference Topics

The following policy briefs offer a deep dive into the conference topics:

“Points of Vulnerability in the Battery Cell Industry” – Kai Müller, Chief Financial Officer of PowerCo SE, and Sören Pippart, Senior Expert for Public Affairs at PowerCo SE, outline Germany’s weaknesses and possible courses of action in the battery sector.

“Waiting for the Big Bang: Executing the European Defense Build-Up in Germany” – Robin Fehrenbach, Head of Analysis and Documentation at Atlantik-Brücke, Jakob Flemming, Senior Program and Research Manager at Atlantik-Brücke, and Julia Friedlander, CEO of Atlantik-Brücke, describe how Germany is attempting to become defense-ready in record time.

“The dollar in the fight for US primacy” – Martin Mühleisen, former official at the International Monetary Fund (IMF) and Nonresident Senior Fellow at the Atlantic Council’s GeoEconomics Center, analyzes how the US under President Trump uses economic policy as a tool to advance foreign policy priorities.

“How to dismantle a reserve currency” – Daniel McDowell, Nonresident Senior Fellow at the Atlantic Council’s GeoEconomics Center, reflects on whether the days of the dollar as a reserve currency are numbered and whether the euro is ready to take its place.

“The Road to Turnberry” – Elizabeth Baltzan, Senior Fellow at the Atlantic Council GeoEconomics Center and former advisor to the US Trade Representative, assesses the latest trade deal between the European Union and the United States.

“The summer of AI action plans” – Alisha Chhangani, Assistant Director at the Atlantic Council GeoEconomics Center, and Ananya Kuma, Deputy Director, Future of Money, at the Atlantic Council GeoEconomics Center, analyze the widening gap between the US, China, and Europe on artificial intelligence.

Watch a look back at the forum here:

Watch the full recording of the Transatlantic Forum here:

Watch here exclusive Video interviews with the Pannelists:

Der Beitrag Responding to Global Shifts erschien zuerst auf Atlantik-Brücke e.V..

As the US champions deregulation and private investment, the EU’s rule-bound approach and budget limits threaten to widen the transatlantic gap—just as competition with China intensifies. 

By Ananya Kumar and Alisha Chhangani

This summer, the European Union (EU), the United States, and China all laid out strategy documents on their respective approaches to artificial intelligence (AI) domestically and abroad.

As both the United States and European Union unveil ambitious AI strategies this summer, a paradox emerges: despite sharing broadly similar objectives—boosting domestic AI capabilities, maintaining technological leadership, and managing AI risks—the two allies find themselves increasingly at odds over how to achieve these goals. The divergence reflects fundamental differences in regulatory philosophy, economic structure, and geopolitical positioning that threaten to fragment what should be a unified Western approach to AI governance at a critical moment of competition with China.

[related] The Donald Trump administration’s “Winning the Race: America’s AI Action Plan” outlines a vision of AI as a decisive frontier of global economic and security competition. The first pillar— Accelerate AI Innovation— advocates for a deregulated, private-sector-led environment by reducing regulations, promoting open-source AI models, and fast-tracking AI deployment in industries such as healthcare, while tackling some questions about workforce transition. The second pillar—Build American AI Infrastructure— addresses energy capacity by upgrading the electric grid, restoring domestic semiconductor manufacturing, building secure data centers, and establishing cybersecurity measures including incident response capabilities. The third pillar—Lead in International Diplomacy and Security—seeks to counter Beijing’s growing influence in international governance bodies and export the full stack of US AI to allies and partners. The plan also identifies financial services as both an opportunity and a vulnerability. AI is viewed as a driver of financial innovation and efficiency, but also as a channel for risks including misinformation, cyber fraud, and systemic instability.

“Approaches from the United States and the EU are both likely to face issues regarding capital and financing of these action plans.”

The European Commission’s AI Continent Action Plan was unveiled in April 2025, and is part of a long series of reports and regulations undertaken by the EU to bolster its competitiveness in AI. It lays out a five-pronged plan to scale up computation models through new AI factories, innovation hubs, and pooled resources, improve access to and availability of high-quality data, accelerate application of AI through public services and industrial activities, enable the Draghi report’s ambition to “exceed the US in education” when it comes to training and retaining skilled talent, and further fortify the European single market for AI.

Both the approaches aim to buttress domestic adoption and application of AI—often through nudges from the state when it comes to exploring applications in public services, and encouragement for many kinds of commercial activities. China has come to a similar conclusion, with its continual emphasis on using local government action plans to diffuse AI into public service provisions, and all kinds of industrial activities through its “AI Plus” initiative. There are few references to China in the EU’s latest AI document, while Washington’s approach has both implicit and explicit connotations of a largely two-way race between itself and Beijing.

Approaches from the United States and the EU are both likely to face issues regarding capital and financing of these action plans. While US private-sector investments in AI are many-fold those in the EU and China, the scale and focus of spending make a big difference. In the United States, the Trump administration has put AI contracts front and center in its broader deregulation approach—recent quarters have seen dozens of venture capital rounds above $100 million, and large megadeals (one of about $40 billion in the first quarter of 2025 alone aside) are becoming more common. Major players like Microsoft have committed to $80 billion this year for AI-capable data centers, and overall US tech capital expenditure for AI and infrastructure is being projected in the hundreds of billions over the next few years.

Meanwhile, across the EU, fiscal rules constrain deficit and debt levels: member states are required to keep deficits below 3 percent of gross domestic product (GDP) (though some exceed this threshold) and debt below 60 percent. The EU’s budget amounts to about 1 percent of GDP, and key instruments such as the Recovery and Resilience Facility are set to expire in 2026—leaving a gap in large-scale funding. The EU is currently negotiating its next seven-year budget (2028–2034), which is expected to place strong emphasis on large-scale investments, including a proposed Competitiveness Fund. In China, while growth targets remain and fiscal policy is being kept “flexible,” debt burdens, weak investment returns in sectors such as property and manufacturing, and slowing external demand limit what Beijing can unilaterally spend without risking macroeconomic instability.

These differences mean that even when headline figures like “$500 billion investments” are floated, much of that tends to flow into private capital for infrastructure, cloud and chip production, startup rounds, and acquisitions. They are not distributed evenly or necessarily aimed at building strategic domestic capabilities. Europe and China risk being unable to match the pace of US capital expenditure, not only because of absolute capital constraints but because of institutional, regulatory, and macro-fiscal drags.

Challenges to US-EU alignment on AI

These structural spending imbalances are compounded by inconsistent US policy decisions that leave European partners scrambling to adapt. For example, Joe Biden administration’s AI diffusion rule in January 2025 left many countries in Europe with restrictions on importing advanced chips from the United States, and led to a call for maintaining a “secure transatlantic supply chain on AI technology and super computers, for the benefit of our companies and citizens on both sides of the Atlantic.” The Trump administration repealed this rule and, in its place, the EU committed to purchasing $40 billion of US-made chips as a part of its trade agreement with the United States.

This interaction lays bare the two tensions complicating the US-EU alignment on AI strategies. The first concerns the strategies’ time horizons and the enabling actions undertaken by each jurisdiction. The EU’s approach has been solidified with years of iterative public discussion amid the market transformation from AI—starting with the Draghi report, the AI Act and even Ursula von der Leyen’s European Commission presidency campaign. In contrast, the US AI strategy has seemed reactive and temperamental—shifting focuses between administrations on important issues such as risk and safety, open-source models, and export controls. Recent partnerships with the Gulf states and lifting of controls on NVIDIA’s H20 chips sale to China have also demonstrated a deal-making approach to AI, which is often at odds with the stated US strategy.

The EU has embraced binding rules such as the AI Act, in line with its broader tradition of digital regulation. By contrast, US administrations have favored light-touch, voluntary frameworks, and sectoral oversight rather than comprehensive law. This reflects a bipartisan reluctance to over-regulate the industry. This divergence in regulatory culture means that even when Washington and Brussels agree on broad goals, they often diverge on the instruments used to achieve them,

The second tension in the US and EU strategies concerns the EU’s own complicated motivations in the context of its present economic interdependence on the United States and China. This reliance is visible across the entire AI input stack. At the software level, European firms overwhelmingly depend on US-developed foundational models, cloud platforms, and AI tools provided by companies such as Microsoft, Google, and OpenAI, reflecting the absence of a globally competitive European alternative. In 2025, the United States produced about forty large foundation models, China around fifteen, and the EU only about three.

“Chinese companies dominate the refining of critical minerals such as rare earths and graphite, essential for chipmaking and AI datacenter equipment.”

At the infrastructure and cloud level, the “big three” US cloud hyperscalers are estimated to power about 70 percent of European digital services. At the hardware level, the EU remains structurally reliant on advanced semiconductors designed in the United States and fabricated in Asia, with Europe’s domestic semiconductor sector making up less than 10 percent of global production.

Supply chains for critical minerals and legacy chips further reinforce exposure to Chinese producers, which control a significant share of upstream inputs and mid-tier manufacturing. Chinese companies dominate the refining of critical minerals such as rare earths and graphite, essential for chipmaking and AI datacenter equipment. They are also leading suppliers of mid-range GPUs, networking hardware, and AI server components, which European firms may increasingly source to diversify away from US vendors. Chinese technology companies, including Baidu and Alibaba, are also emerging players in foundation model training and deployment, reinforcing Europe’s reliance on external providers. These dependencies complicate the EU’s sovereignty ambitions and its ability to balance relations with the United States.

Recognizing these vulnerabilities, the EU launched initiatives to expand domestic capacity, raising about €20 billion to build “AI gigafactories.” These factories would be capable of hosting large-scale compute infrastructure, with the aim of catching up to the US and China. While these projects signal a commitment to reduce dependency, they remain long-term efforts. Even as Europe invests in its own infrastructure, there is still high exposure to non-EU supply chains for the critical inputs into AI. The European Central Bank noted that about half of Euro area manufacturers sourcing critical inputs from China report being exposed to supply chain risk.

These two tensions—volatility in US policy actions and the gap between the EU’s ambitions of sovereignty and its reliance on US and China for critical inputs—will continue to play out over the next few years.

The financial services sector and AI action plans

For financial services in particular, AI adoption is accelerating—banks now flag AI as core to transformation. JPMorgan reports hundreds of production use cases across fraud, marketing, and risk in its shareholder communications, while Bank of America’s “Erica” virtual assistant has logged more than 2 billion client interactions—evidence that AI is reshaping front-, middle-, and back-office processes from customer service to underwriting to treasury operations. This brings opportunities including cost and error reduction, real-time risk sensing, and new AI-enabled products like cash flow intelligence for corporate treasurers.

“Financial services represent one of the highest-risk sectors for AI adoption, given the direct societal impact of errors or bias in lending, risk modeling, or compliance monitoring.”

But financial services also represent one of the highest-risk sectors for AI adoption, given the direct societal impact of errors or bias in lending, risk modeling, or compliance monitoring. The AI Index 2025 shows that measurable gains remain modest, with most firms reporting less than 10-percent cost savings or revenue growth below 10 percent. AI adoption for financial services also lags in key areas. Many institutions remain in pilot phases, data quality and legacy infrastructure limit deployment, and regulatory uncertainty combined with talent shortages slows uptake in high-risk applications such as credit scoring and underwriting.

Regulatory divergence sharpens these trade-offs: The United States leans on voluntary risk-management tooling (the National Institute of Standards and Technology – Artificial Intelligence Risk Management Framework) that gives firms latitude to innovate, whereas the EU’s binding AI Act and sectoral guidance from the European Securities and Markets Authority impose high-risk classifications and board-level accountability for AI in investment services—raising documentation, testing, and oversight burdens for cross-border finance.

Ultimately, the private sector and business in both jurisdictions need to adapt to these tensions and, in some cases, even begin to view them as productive in their journey of AI adoption and diffusion across various functions. What the AI action plans have done is provide a broad framework of AI strategy. But for financial services companies and the broader commercial sector, the devil is in the details, and will require closing the transatlantic gap in the regulatory approach to AI. This seems more difficult than it would have a year ago.

Ananya Kumar is the deputy director, Future of Money, at the Atlantic Council GeoEconomics Center.

Alisha Chhangani is an assistant director at the Atlantic Council GeoEconomics Center.

Check out our other policy briefs for the Transatlantic Forum on Geoeconomics:

„Points of Vulnerability in the Battery Cell Industry“ by Kai Müller, Chief Financial Officer at PowerCo SE. and Sören Pippart, Senior Expert for Public Affairs at PowerCo SE.

„The dollar in the fight for US primacy“ by Martin Mühleisen, former International Monetary Fund (IMF) official and nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„Waiting for the Big Bang: Executing the European Defense Build-Up in Germany“ by Robin Fehrenbach, Director of Research and Documentation at Atlantik-Brücke, Jakob Flemming, Senior Program & Research Manager at Atlantik-Brücke and Julia Friedlander, CEO of Atlantik-Brücke

„How to dismantle a reserve currency“ by Daniel McDowell, nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„The Road to Turnberry“ by Elizabeth Baltzan, Senior Fellow at the Atlantic Council GeoEconomics Center and former Senior Advisor to the US Trade Representative.

Der Beitrag The summer of AI Action Plans erschien zuerst auf Atlantik-Brücke e.V..

Political forces, not just market dynamics, are now driving fundamental change in the dollar’s role as the world’s reserve currency, with the Trump administration challenging decades of monetary orthodoxy. As Washington questions its commitment to the dollar’s dominance, uncertainty rises—and the euro may finally be poised as a true challenger.

By Daniel McDowell

Few national monies have what it takes to reach international reserve currency status. Markets are picky, only elevating currencies with stable values and issued by states with broad international transactional networks and large, open financial markets. The role of politics in shaping the global currency hierarchy is seen as secondary to these baseline economic fundamentals. That is changing as the second Donald Trump administration has thrust politics to the fore of a renewed discussion about the dollar’s reserve currency status. In the great global currency debate, market forces have never been more passé and political forces have never been so prominent. As the Trump administration’s foreign policy upends the liberal international order (LIO) upon which dollar dominance is built, questions are being raised about the future of the dollar and the potential for change in the international currency system—and rightly so. As realist scholar Robert Gilpin argued, “Every international monetary regime rests on a particular political order.”[1]

With the survival of the LIO now in question, Gilpin’s thesis is being tested in real time. Dollar dominance is as much a political phenomenon as a market-driven one. It reflects a set of ideas about what it means to be the reserve currency issuer, as well as a series of policy choices that enabled and fostered the dollar’s international use. If ideas and policy choices change, the status quo monetary equilibrium will destabilize. Today, the Trump White House appears to be breaking from the long-standing postwar view that the dollar’s reserve currency status is in the US interest. This position shift reflects a contrarian perspective that blames the dollar’s reserve role for large US trade deficits and industrial decline. Consequently, the administration is embracing an unorthodox economic policy path to undo these alleged harms. As uncertainty about the United States’ political commitment to the dollar’s reserve role grows under this administration, the currency’s appeal will diminish.

“A more independent Europe that finances a large and fast-growing military budget through joint debt issuances could put the euro on a path toward being the dollar’s rival.”

International security dynamics are also stoking change. US allies are incentivized to hold dollars due to security considerations. Moreover, so long as they depend on Washington for protection, their own currencies are less likely to emerge as rivals to the dollar. Trump views US allies as free riders who have taken advantage of the United States by enjoying military protection without paying for it, leading him to openly question the NATO Alliance. If the United States casts aside its security responsibilities in Europe and elsewhere, former military dependencies will pursue self-help security strategies. A more independent Europe that finances a large and fast-growing military budget through joint debt issuances could put the euro on a path toward being the dollar’s rival, which some predicted it could become a quarter century ago.

[related] The dollar’s rise, enshrinement, and reign as the world’s indispensable currency coincided with an unprecedented era of global economic integration and international institution building. As US power has waned in the twenty-first century, its currency power has remained steady. Indeed, dollar dominance might be the most durable feature of the aging US-led postwar international order. [2] Predicting its demise has been a foolhardy enterprise for more than half a century. This time could be no different, but there are reasons to think it might be. For all the economic tumult that the dollar has faced and endured over the last eighty years, its political foundations have remained steadfast—until now. As the political order on which the dollar system rests grows creaky, dollar preeminence is also looking wobbly.

The reserve currency role as policy choice

Political economist Jeffry A. Frieden’s opus Global Capitalism, a sweeping historical account of economic globalization in the twentieth century, presents us with a seven-word thesis: “Globalization is . . . a choice, not a fact.”[3] Frieden’s pithy point is that global markets do not develop in a political vacuum; rather, they are the product of politics, of government policy choices that remove barriers to economic integration. The political base upon which markets are built is easy to ignore, especially during times of openness and cooperation. However, when things begin to fall apart, the weight of politics and policy becomes impossible to miss.

Extending Frieden’s thesis, it is also true that issuing the world’s reserve currency is a choice, not a fact. US economist Peter B. Kenen wrote more than fifty years ago that the United States “allowed other countries to attach [reserve currency] status to the dollar.” [4] That is, US policy choices enabled market actors to elevate the dollar to its global currency status.

Decades of US political leadership supported the dollar’s reserve currency role largely for one reason—it was believed to be in the US national interest. Because the world’s investors want to hold dollars, the US government, as well as US businesses, can tap global capital markets for a seemingly limitless supply of low-cost financing. To overly simplify it, being the reserve currency issuer is akin to having a credit card with an unusually high borrowing limit and the lowest interest rates available. This gives the United States unparalleled macroeconomic flexibility, allowing Washington to keep taxes low while spending more freely on priorities like national defense than it could if its currency were not so special. This is why, in the late 1960s, France’s finance minister infamously labeled the dollar’s reserve status an “exorbitant privilege”; it uniquely allowed the United States to practice fiscal profligacy without being disciplined by markets.

“As a borrower, the US government has earned a sterling reputation by never defaulting on its bonds, which is a central reason why US Treasuries are viewed as safe assets.”

Given the perceived benefits of issuing the world’s reserve currency, preserving dollar preeminence has been a mainstay of presidential administrations going back decades. The proof is in the policy. For example, successive administrations have espoused the United States’ commitment to a “strong dollar,” aimed at ensuring that dollar assets maintain their long-term appeal to foreign investors. Since fully deregulating its capital markets after the Bretton Woods system collapsed, the United States has maintained an open-door investment policy, making it an attractive destination for foreign capital. As a borrower, the US government has earned a sterling reputation by never defaulting on its bonds, which is a central reason why US Treasuries are viewed as safe assets. During the most extreme moments of global financial distress, the Federal Reserve has repeatedly acted as the lender of last resort to the global economy, making its currency available to jurisdictions where panic had made dollar funding scarce. The political independence of the Federal Reserve, while occasionally tested by presidents, has been respected and protected, signaling competent, technocratic management of the dollar.

None of this happened by accident. To return to Frieden’s thesis, the United States has chosen, time and again, to take on the role and responsibility of issuing the world’s reserve currency. Now, as the United States’ commitment to the LIO appears to be fading, its commitment to the dollar’s reserve role might also be slipping away.

From privilege to burden

What happens if US policymakers change their minds? How might US policy evolve if Washington no longer views issuing the reserve currency as a net positive for the United States and something worth preserving? We are beginning to get answers to these questions as the Trump administration breaks with decades of dollar policy orthodoxy.

At the heart of this apparent position shift is a contrarian view of the dollar, associated with the ideas of Michael Pettis, which portrays the reserve currency role as a burden rather than a privilege. [5] As the primary provider of the global safe asset, the argument goes, the US financial system absorbs massive amounts of foreign capital each year. As foreign central banks and private investors buy dollars to scoop up safe, highly liquid US Treasury bonds, the dollar’s value increases while corresponding foreign currency values are depressed. As a result of the strong dollar, US-made goods are uncompetitive globally, depressing exports, while foreign goods are inexpensive in US markets, stimulating imports. The net effect is a large and persistent current account trade deficit that harms US producers and shrinks US industrial capacity.

This perspective has gained a foothold within the Trump White House. In a 2023 public hearing with Federal Reserve Chair Jerome Powell, then Senator JD Vance suggested that reserve currency status amounts to “a massive tax on American producers” and linked it to a “hollowed out industrial base.”[6] Stephen Miran, the president’s chair of the Council of Economic Advisers and his nominee for Federal Reserve governor, published a paper last year detailing policy steps the Trump administration might take to offload some of the reserve currency burden onto other countries.[7]

For Miran, the objective is clear: to rebalance US trade with the world through dollar devaluation and bring down long-term US debt service costs in the process. He meticulously outlines a range of policy paths the administration can take toward these ends, including: the imposition of tariffs to bring trading partners to the table where a coordinated, multilateral dollar devaluation could be negotiated; cutting off allies from US security commitments and from the Federal Reserve’s dollar swap lines unless they agree to exchange their ten-year US Treasury bills for hundred-year bonds; imposing a “user fee” or tax on foreign official holders of US Treasury securities to reduce the inflow of capital into US financial markets; and influencing Federal Reserve policy to assist in weakening the dollar.

Uncertainty and the dollar

Whether the White House chooses to pursue all, some, or none of Miran’s proposals, the discussion itself generates uncertainty about the global dollar’s future. Political scientists Helen Milner and Erik Voeten argue that, even in the absence of fundamental changes to the “building blocks” of the LIO, uncertainty about the stability of those building blocks—including uncertainty about future policy choices—can affect the global economy.[8] If structural uncertainty increases to the point that the equilibrium to which most market actors previously expected to converge is no longer shared, behavior becomes unpredictable.

The Trump administration’s unorthodox position on the dollar is producing uncertainty on multiple fronts. First, there is the apparent end of a US commitment to a strong dollar. If dollar asset holders expect that the currency is in a sustained depreciation, the appeal of US assets will decline relative to alternatives. Second, there is the question of swapping short-term Treasury bills for much less attractive hundred-year bonds, a move that many would consider a technical default on US debt obligations. If the United States can force foreign governments to accept this deal today, it might do so again in the future. This undermines confidence in future bond issuances, making US Treasuries less attractive as a safe asset. Next is the proposal that the United States might deny its partners access to the Fed’s dollar swap lines. This suggestion has already raised anxiety in Europe and, if implemented, would be viewed as an abdication of US monetary leadership.[9]

“The notion that the White House might somehow secure the Federal Reserve’s cooperation in an effort to depreciate the dollar raises questions about the independence of the US central bank.”

Then there is the suggestion that the United States could impose capital controls to slow financial inflows into US Treasuries. This move would challenge the United States’ fifty-year reputation as the world’s most open financial system and raise questions about its future commitment to liberalism. Finally, the notion that the White House might somehow secure the Federal Reserve’s cooperation in an effort to depreciate the dollar raises questions about the independence of the US central bank, fanning fears about the soundness of US monetary policy and the dollar’s long-term appeal as a store of value. These measures, to say nothing of the use of coercive trade measures or the threat to withdraw US security protections to key allies, have the potential to reshape how the dollar is perceived around the world.

What happens if structural uncertainty about Washington’s global dollar policy increases? We might have witnessed a trial run of this in April amid the unveiling of Trump’s “Liberation Day” tariffs and his unprecedented threats to fire Powell (threats which continue today). Historically, the dollar strengthens and US bond yields fall in times of crisis and uncertainty, as investors rush for the safety of US Treasuries. This is precisely what happened during the initial weeks of the global financial crisis in 2008, as global investors clambered out of risk assets, such as equities and emerging market assets, and into the haven of US debt securities. In April 2025, however, investors sold their riskier US equities as well as their “safe” US government bonds. Rather than the dollar appreciating and government bond yields falling after Trump’s announcement, the dollar slumped and US borrowing costs jumped, shocking markets. Amid swelling uncertainty about the United States’ political commitment to the global dollar and to liberal economic principles, the old currency equilibrium might be approaching its critical point. Uncertainty about US security commitments is also contributing to this instability. 

Security and securities

Collective security is a core component of the LIO, with NATO functioning as its cornerstone. The transatlantic Alliance rests on the bedrock principle that an attack on one member is an attack on all, yet Trump’s transactional approach to foreign policy is straining the credibility of Article 5. Today, US allies in Europe and beyond question whether they can count on Washington to guarantee their security in a future crisis.[10] [11]

While the connection might not appear obvious at first glance, a breakdown in trust within the US alliance network could further weaken the dollar’s reserve currency status. Foreign governments that rely on the United States for security tend to hold a higher share of their foreign exchange assets in US dollars. Investments in US government debt subsidize Washington’s ability to pursue an assertive military posture in the world, including providing defense guarantees for its allies. Thus, security dependencies are incentivized to buy Treasuries that finance the US defense capabilities on which they rely. Were Washington to pull back from its defense commitments abroad, the security-driven logic for holding dollars would fade, cutting into demand for dollar assets.

More importantly, as Trump has sown uncertainty about the United States’ commitment to NATO, Europe is now planning for a future in which its security will not depend on the United States. If Europe embraces a unified approach to security-driven fiscal expansion, the euro stands to expand its share of global reserves at the US dollar’s expense.

TINA meets the euro

Hyping the euro’s potential is as old as the euro itself. Upon its introduction at the turn of the century, some observers envisioned the new monetary unit emerging as the dollar’s equal, if not its rival. Jacques Delors, former European Commission president, proclaimed, “the little euro will become big” [12] while former Federal Reserve Chair Alan Greenspan speculated that “it is absolutely conceivable that the euro will replace the dollar as [the] reserve currency.”[13] Though the currency has ensconced itself as the clear number-two international currency, it is a distant second, accounting for 20 percent of global reserves to the dollar’s 57 percent.

The euro’s stunted rise has reinforced the popular view that dollar dominance is destined to endure indefinitely. Even as dissatisfaction with dollar dominance has climbed because of rising US debt levels and Washington’s reliance on financial sanctions, skeptical observers cry “TINA!” (there is no alternative). This argument accepts that the dollar system is flawed but asserts that it remains the cleanest dirty shirt in the laundry bin. The euro cannot supplant the dollar’s reserve role because the sovereign bond market in Europe is too small and too fragmented. Also, China’s authoritarian political system, closed capital account, and non-convertible currency disqualify the renminbi as an option.

These are not unfair characterizations. On size alone, Europe’s $10-trillion government bond market cannot absorb as much of the world’s savings as the $25-trillion US Treasury market. Furthermore, because the currency union lacks an attendant fiscal union, European governments issue debt separately. With the European debt crisis of fifteen years ago still fresh in market memory, investors rightly view German debt differently than debt issued by other Eurozone nations. In short, European sovereign bonds are of varying quality and are available in too limited a quantity to be a viable alternative to their dollar-denominated counterpart.

“Germany’s surprising elimination of its debt brake is indicative of the change that is already happening.”

Despite these legitimate constraints, the Trump administration’s upending of the United States’ traditional security role in Europe is giving the euro renewed potential as a reserve currency. The European Commission is now calling for the continent to have a self-sufficient defense posture by the beginning of the next decade.[13] To achieve this, the commission acknowledges, “a massive increase in European defence spending is needed,” targeting €800 billion ($930 billion) in newly mobilized financial resources. While not all of this will necessarily be financed through new debt issuances, much of it will. Germany’s surprising elimination of its debt brake—a self-imposed rule that previously limited Berlin’s capacity to deficit spend—is indicative of the change that is already happening.

The issuance of many new sovereign bonds in Europe over the rest of this decade will prove attractive to central banks looking to diversify away from their US Treasury holdings. Importantly, Europe has space for significant and sustained fiscal expansion; in 2024, the European Union’s collective debt-to-GDP (gross domestic product) ratio was 81 percent compared to 120 percent in the United States. European government bond markets have the capacity to grow more than the US Treasury market over the next ten years, increasing the supply of highly rated euro-denominated bonds in primary and secondary markets. There is also reason for optimism on European progress toward unified Eurobond capital markets: the 2025 commission report proposes that €150 billion of the €800 billion total be raised via a newly created financial instrument that would issue single-branded European Union (EU) bonds and EU bills.[14]

Whether these proposals become reality is a political question more than an economic one. The euro’s stunted rise over the last quarter century is attributable primarily to the lack of political will on the continent to implement the policies necessary for the common currency to reach its full international potential. With an aggressive Russia waging a hot war on its eastern flank and a US president aiming to end what he sees as European free riding on US defense, there has never been a moment riper for the Eurozone to take the steps needed to unleash the euro and take down TINA.

What the future holds

We are less than a year into the second Trump administration. Much is yet to be written, and much can still change. In time, the White House might drop its contrarian view of the reserve currency role as a burden and embrace policies that reinforce dollar centrality. Europe might fail to achieve fiscal unity and expansion, leaving its borders less secure from invasion and its currency’s potential arrested once again. However, if we continue along the current path, the erosion of dollar dominance will pick up speed. Change will come in increments, not overnight, but one day—perhaps within the next decade—the dollar’s share of worldwide reserves will fall below 50 percent. This share will continue to slide, not undoing the dollar’s international role but ending its unquestioned unipolar moment. US global financial power and influence will fall in kind.

“The dollar dominance will not last forever.”

History is littered with failed predictions of the international dollar’s imminent demise. The are many reasons why the dollar has endured despite its critics. It has unique infrastructural advantages including its dense, efficient, low-cost, cross-border payment network and the world’s deepest, most liquid, and most open financial markets. It also has incumbency advantage. International currency markets are prone to inertia because of network effects. The benefits any actor derives from using any given currency are directly related to whether others are also using that currency. Once the market settles on a choice (in this case, the dollar) actors have little incentive to change. The dollar has also lacked a true peer competitor in the marketplace. While TINA might not be a strong positive argument for dollar dominance, it remains a powerful, constraining, and stabilizing force. These are all good reasons to bet on the status quo continuing.

Yet it is also true that dollar dominance will not last forever. Eventually, the doomsayers will get it right. As Charles Kindleberger once quipped, “the dollar will end up on history’s ash heap.”[15] Kindleberger was an economist, but one with a keen eye for the fundamental role that politics plays in the world economy. He would have been sympathetic to Gilpin’s observation that monetary regimes and political orders are mutually constituted. Dollar dominance and the US-led LIO were constructed alongside one another by a series of mutually reinforcing policy choices. Whether the former can long endure without the latter is the monetary question of our age.

Daniel McDowell is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center. He is the Maxwell Advisory Board Professor of International Affairs at the Maxwell School of Citizenship and Public Affairs at Syracuse University and a former Wilson Center China Fellow. McDowell specializes in the dynamics of international currency competition, financial sanctions, and financial crisis management, with an emphasis on the United States and China in these arenas.

Check out our other policy briefs for the Transatlantic Forum on Geoeconomics:

„Points of Vulnerability in the Battery Cell Industry“ by Kai Müller, Chief Financial Officer at PowerCo SE. and Sören Pippart, Senior Expert for Public Affairs at PowerCo SE.

„The dollar in the fight for US primacy“ by Martin Mühleisen, former International Monetary Fund (IMF) official and nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„Waiting for the Big Bang: Executing the European Defense Build-Up in Germany“ by Robin Fehrenbach, Director of Research and Documentation at Atlantik-Brücke, Jakob Flemming, Senior Program & Research Manager at Atlantik-Brücke and Julia Friedlander, CEO of Atlantik-Brücke

„The Road to Turnberry“ by Elizabeth Baltzan, Senior Fellow at the Atlantic Council GeoEconomics Center and former Senior Advisor to the US Trade Representative.

„The summer of AI action plans“ by Alisha Chhangani, assistant director at the Atlantic Council GeoEconomics Center and Ananya Kuma, deputy director, Future of Money, at the Atlantic Council GeoEconomics Center.

Der Beitrag How to dismantle a reserve currency erschien zuerst auf Atlantik-Brücke e.V..

Eight months into Trump’s second term, US trade, technology, and currency policy are being weaponized in ways that could reshape the global order. From tariffs to stablecoins, Washington is betting big on economic power to secure geopolitical dominance—can it defy the risks?

By Martin Mühleisen

Eight months into the second Donald Trump administration, the contours of its trade and exchange rate policies are becoming clearer—or at least their objective is. In line with the administration’s wider goal of reasserting the United States’ dominant global role, especially vis-à-vis China, economic policies have now become inextricably linked with US foreign policy priorities. The administration has deployed both its military and economic leverage in the service of its policy goals to a degree not seen for a long time.

With respect to China, the administration is taking steps to preserve and exploit US technological advantages, while trying to close the gap in other areas in which China has strategic advantages. The first category includes advanced chip design and artificial intelligence (AI), in which the United States continues to enjoy a slim advantage over China; the second category includes restoration of US manufacturing with the help of tariffs. Closing the manufacturing gap with China serves both domestic and international ends, of course, with the goal of boosting US employment while building the capacity to sustain a potential military conflict that would otherwise quickly exhaust the United States’ advanced weapons arsenal.

[related] The administration aims to leverage new financial technologies as a source of growth and to keep the dollar at the apex of the world’s exchange rate system. Faced with the development of an internationally tradable Chinese digital currency that would operate outside US law, the administration aggressively pushed for Congress to pass the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act to set up a regulatory environment for US dollar-backed stablecoins. From its point of view, staking out a crypto universe that consists largely of dollar-denominated assets could stifle Chinese plans and further underpin the United States’ economic leverage. Another advantage is that coin issuers would help finance the growing US deficit burden, as crypto firms have already become major buyers and holders of short-term Treasury securities (Figure 1).

At the same time, the administration has discarded important economic principles that, in medical terms, are equivalent to basic advice for a healthy lifestyle. For example, it has emphasized short-term growth by continuing with loose fiscal policies that add to already high debt, hollowed out government functions via across-the-board staff cuts, compromised market integrity by reducing regulatory oversight, appeared to interfere with statistical data collection, and sought to undermine the independence of the Federal Reserve. Formerly close allies and major trading partners are rethinking economic relations with the United States, given a climate of uncertainty in which disagreements in any policy area could trigger new tariff threats as a means of extracting further concessions.

Can the administration defy economic gravity?

These policies have been met with pessimistic—if not downright fatalistic—assessments of the future of the global economy and the international financial system, including in a recent Foreign Affairs edition and a Centre for Economic Policy Research e-book. The gist of these reactions has been that, by discouraging foreign trade and removing the cornerstones of the post-WWII economic order, the administration is: undermining the stability and productivity of the United States and other economies; and creating the risk of global instability, given economic interlinkages and the tight integration of financial markets. The biggest casualty of these developments might be the United States itself, given the inherent contradictions in a policy that aims to close the current deficit without improving public saving, raise productivity while sheltering firms from foreign competition, and cancel energy projects while electricity is urgently needed to feed a sprouting network of data centers—not to mention giving China the opportunity to boost its geopolitical standing as a trading partner and source of economic support for third-party countries.

And yet, the reaction of markets to this generational change in US policies has been remarkably muted. Stock markets have rebounded strongly after the April 2 tariff announcements and, even in the aftermath of the attempted dismissal of Federal Reserve Governor Lisa Cook, capital inflows into the United States have remained strong. The dollar and long-term Treasury markets have weakened in recent months, but these movements have been minor compared to the momentous policy reversals in recent months.

“The dependence on China as a provider of these minerals presents a major constraint on the Trump administration’s latitude for further action.”

The momentum in technology stocks could well overshadow the consequences of recent policy changes, which will take some time to show their full effect. The picture would be much worse, however, had the United States and China not agreed to a truce in their trade dispute, with the United States refraining from further tariff measures in exchange for China’s continuing exports of rare earth minerals. Indeed, the dependence on China as a provider of these minerals presents a major constraint on the Trump administration’s latitude for further action.

It remains to be seen how markets will react to the possible release of pent-up inflation in the coming months, including from rising energy prices, the exhaustion of stockpiles of goods imported at lower tariff rates, and sectoral labor market shortages due to ramped-up immigration enforcement. A slowing economy might mitigate price pressures for some time, especially if there is a rise in unemployment among younger labor market cohorts, but it would be difficult to imagine these factors not reasserting themselves as long as the fiscal position is extremely loose.

If the administration were to respond by suppressing inconvenient data or shaping the Federal Reserve’s interest decisions, volatility could increase sharply. This risk still seems remote, but there is a real possibility of a fiscal doom loop due to a blowout of long-term interest rates caused by investors moving out of Treasuries, risking financial distress in case of unexpected market movements.

Currency dominance by default?

With these prospects, the debate about the future of dollar dominance is back in full swing. The risks of using the dollar would certainly increase if the Trump administration were able to directly influence monetary policy in the face of rising inflation (as happened, for example, under Turkish President Recep Tayyip Erdoğan in recent years, leading to overall negative outcomes).

It is important to keep in mind, however, that changes in global currency arrangements are not bound to happen overnight. Even in the case of large policy mistakes, the global role of the dollar might only weaken gradually, as it still seems unlikely that another dominant currency contender could replace it within a short time period.

A recent Atlantic Council strategy paper emphasized the link between global hegemony and reserve currency status, suggesting that only China, with its economic reach and geopolitical expansion, could possibly become a successor to the United States. Europe, meanwhile, is buffeted by powerful forces from the outside and within, ruling out a major geopolitical role for the euro in the foreseeable future.

However, China’s economic model is showing severe strains from adverse demographics, stagnant growth, and a large domestic debt overhang. Moreover, as China is a continental (rather than maritime) power, Chinese leaders have consistently stated that their strategic aims revolve around regional order and expanding trade and economic relations, rather than gaining global dominance. Another reason to be skeptical about the renminbi’s international use is that China’s capital account and financial markets are still tightly controlled and fairly closed to the outside. Moreover, the renminbi plays only a limited role as a store of value, given China’s lack of a stable and transparent regulatory regime and an independent judiciary.

Chinese authorities have refrained from liberalizing the capital account because of the risk that residents would invest substantial parts of their savings abroad for more attractive returns, leading to sharp capital outflows. This risk would, of course, diminish if the United States (along with other Western countries) were to end up in a debt spiral, but it still seems unlikely that the Chinese Communist Party would give up control over its citizens’ external transactions.

“The administration seems to hope that a tariff- and technology-driven boost will restore the US economy to the dominant position it once held.”

While this is obviously speculative, perhaps it will one day become possible for China to fully trace the participants and purposes of transactions in renminbi-based stablecoins, using its extensive surveillance capabilities in combination with sophisticated AI tools. This could allow further liberalization for foreign investors while keeping domestic capital controls in place. If China were also able to reassure foreign investors about their property rights and the rule of law, the renminbi could become more attractive as an investment vehicle, boosting its international use.

This thought experiment is just to show that we are entering uncharted territory. Eighty years after Bretton Woods, a new chapter of international finance is being written, in terms of both technology and the shared commitment to financial stability. The Trump administration supports this transition because it believes that earlier administrations did not respond forcefully enough to China’s misuse of global rules, to which it credits the country’s rise as a manufacturing power. The administration seems to hope that a tariff- and technology-driven boost will restore the US economy to the dominant position it once held.

With policies in flux, it is hard to predict how this paradigm change will play out. The United Kingdom at the end of the nineteenth century certainly did not expect the pound to be displaced by the dollar within a generation. Neither is it clear that there will be a dominant currency in the years to come. The alternative could be a multipolar, or even fragmented, global financial system with all the costs, uncertainties, and volatility that this could bring.

Stablecoins are no panacea

What seems certain, however, is that further cooperation between the large economies will be needed even if the administration succeeds in leveraging crypto technology to support the dollar’s global status.

The reason is that stablecoins will operate freely across borders, with different issuers competing for customers through a variety of incentives, which could include interest payments or the ability to obtain loans against their holdings. This is not allowed under the GENIUS Act, but other countries might be more lenient, or industry pressure might prompt changes to relevant legislation. However, the diversion of reserves by stablecoin issuers would increase the already nontrivial risk of a run by coin holders, which exists even under stricter regulatory standards.

“Unlike banks, stablecoins have no access to central bank balance sheets in case of distress, making it more difficult to inject emergency liquidity into the system.”

The potential erosion of stablecoin discipline, as well as the consequences of stablecoins’ illegitimate use and susceptibility to cyberattacks, will require collaboration between regulators and monetary authorities of different jurisdictions. Unlike banks, stablecoins have no access to central bank balance sheets in case of distress, making it more difficult to inject emergency liquidity into the system. This further increases the risk of fire sales of the underlying assets—with potentially cataclysmic spillovers into the real economy.

For the same reason, it is clear that the United States must adopt responsible fiscal policies to support the primacy of global dollar-based stablecoins. Doubts about the value of the underlying asset would be a prime reason for investors to sell off their coin holdings. This is yet another reality that the administration will not escape. Crypto holdings can certainly help finance the deficit, but investors will take things into their own hands if the United States is unable to keep its public debt at reasonable levels.

To conclude, we could be at the cusp of an unprecedented change in the global financial landscape. The Trump administration looks to unshackle itself from what it sees as the constraints imposed on the United States by the previous global architecture. It seeks to preserve the dominance of the US dollar by means of stablecoins as one major advantage in its competition with China. Despite its unorthodox and controversial economic policies, it will need to realize that stablecoins offer no free lunch in the battle for geopolitical influence. Economic discipline and international cooperation must continue even under the envisaged paradigm change—a lesson that should be heeded before a crisis reminds us of it.

Martin Mühleisen is a former International Monetary Fund (IMF) official with decades-long experience in economic crisis management and financial diplomacy. He is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, focusing on questions of global economics and multilateral institutions.

Check out our other policy briefs for the Transatlantic Forum on Geoeconomics:

„Points of Vulnerability in the Battery Cell Industry“ by Kai Müller, Chief Financial Officer at PowerCo SE. and Sören Pippart, Senior Expert for Public Affairs at PowerCo SE.

„Waiting for the Big Bang: Executing the European Defense Build-Up in Germany“ by Robin Fehrenbach, Director of Research and Documentation at Atlantik-Brücke, Jakob Flemming, Senior Program & Research Manager at Atlantik-Brücke and Julia Friedlander, CEO of Atlantik-Brücke

„How to dismantle a reserve currency“ by Daniel McDowell, nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„The Road to Turnberry“ by Elizabeth Baltzan, Senior Fellow at the Atlantic Council GeoEconomics Center and former Senior Advisor to the US Trade Representative.

„The summer of AI action plans“ by Alisha Chhangani, assistant director at the Atlantic Council GeoEconomics Center and Ananya Kuma, deputy director, Future of Money, at the Atlantic Council GeoEconomics Center.

Der Beitrag The dollar in the fight for US primacy erschien zuerst auf Atlantik-Brücke e.V..

by Robin Fehrenbach, Jakob Flemming, and Julia Friedlander

Since Germany’s reunification, defense spending has been a taboo topic in the country. Russia’s war with Georgia and incursions into Ukraine in 2014 raised relatively few strategic concerns in Berlin, and it took until February 2022 to shake the system loose. From guns versus butter debates to the unwinding of spending orthodoxies and industrial transformations, the last several years have witnessed a small revolution in the national dialogue as well as in the broader economy. The country has begun building a military-industrial complex essentially from scratch and exploiting all means to finance it—including using the public purse, commercial banking, and private capital. Policymakers and industry leads must deliberate what will be financed nationally, in consortium or through European Union (EU) and NATO mechanisms. It is all new.

European institutions are also expanding their mandate. The European Commission appointed Lithuanian Andrius Kubilius as its first commissioner for defense in a bid to draw defense consolidation into the technocratic machine best known for streamlining trade and financial regulation across the bloc. In November 2024 at the Berlin Security Conference, then-Commissioner-Designate Kubilius called for a “Big Bang” approach in defense policy, which would entail “producing a clear Industry Output Plan, based on the analysis of capability gaps according to NATO evaluations and covered by European production of defence equipment where we have capability gaps, with a clear target date to fulfil this Plan around 2030.” [1]

The political will is there – and the private sector is ready to contribute

The June 2025 commitment of NATO Allies to spend 5 percent of gross domestic product (GDP) on security and defense until 2035 provides the new baseline and blueprint for European defense [2]: 3.5 percent is to be invested into weapon systems and ammunition, 1.5 percent into critical infrastructure. NATO Secretary General Mark Rutte articulated this shift after pre-summit consultations with President Donald Trump, but he already had the facts to back up his assertions to the US president [3]. Just weeks earlier, Germany had upended its constitutional debt brake for security and defense investments and created the Sondervermögen for infrastructure.

After years of circuitous debate, the presumed new chancellor, Friedrich Merz, invoked the outgoing German Bundestag mandate to relax the debt brake [4]. The move ultimately gained support across the centrist political spectrum, ensuring that both state-driven and external financing mechanisms would be used to reach NATO pledges. The drastic increases in defense spending remain broadly in line with fiscal principles, requiring what some would call an accounting trick, and others a compromise. Defense investments are now exempt from the constitutional debt brake and can total up to 1 percent of GDP [5]. Anything beyond 1 percent of GDP for defense investments requires credits in special funds, usually referred to as Sondervermögen. While on-budget expenditures and investments in security and defense depend on the incoming tax revenues of the German economy, discretionary spending is effectively freed from these constraints, imposing no specific limit on such extra funding. Defense spending has gone from a crawl to a sprint, overnight.

It is a sea change that the government will now rely on private funding to uphold its national security obligations.

Government stimulus tends to trigger private sector interest, which is poised to play a crucial role in scaling up defense-related resources, increasingly billed as a reliable, growing, and even socially responsible investment sector. Commercial and investment banks as well as private equity and venture capital firms are rapidly developing products for both institutional and private clients, reflecting broader awareness among decision-makers from the public and private sectors that capital is needed to meet defense spending goals. As Deutsche Bank Chief Executive Officer Christian Sewing put it, “we need to efficiently combine public funds with private capital to finance expansion. Banks and investors are ready for this – for example, Deutsche Bank’s corresponding loan portfolio amounts to a mid-double-digit billion-euro amount.” [6]

Two recent high-level events that the Atlantik-Brücke hosted in Berlin brought together stakeholders from the military and private sector to discuss how private capital can fund the German defense build-up, sending a clear signal that private investors are ready to channel capital into Germany’s defense capabilities. It is a sea change that the government will now rely on private funding to uphold its national security obligations.

Based on this assessment, the EU created a program, SAFE (Security Action for Europe), to provide €150 billion in long-maturity loans for procurement efforts and fund projects based on common procurement [10]. SAFE projects should involve “at least one Member State benefitting from SAFE and another Member State, as well as Ukraine and EEA-EFTA [European Economic Area-European Free Trade Association] countries,” but will also temporarily fund individual member states’ procurement in acute security crises. It remains to be seen whether SAFE can fulfill Commissioner Kubilius’ big promise from September 2025 to “unify our fragmented defence procurement.” [11] For the time being, nation-states and private capital will provide the lion’s share of required funding, largely due to the direct economic impulse defense spending gives to national economies and their flagship contractors.

Through defense, Germany’s economy can change in shape and scope

Increased investment in military systems will impact the overall industrial and economic landscape in Germany. In addition to defense allocations, the Sondervermögen also includes €500 billion for infrastructure and climate protection [12]. It has not escaped the governing parties that the security crisis in Europe provides an opportunity to ignite a long-needed growth stimulus for the German economy. Germany remains the third-largest economy in the world, but is poised to record a third consecutive year of zero or negative growth. This year most likely will not bring the turnaround: In the second quarter of 2025, Germany’s economy decreased by 0.3 percentage points compared with the first quarter [13]. All major economic institutes in the country as well as the International Monetary Fund predict hardly any economic growth for Germany in 2025 [14].

Germany’s defense industry will also play a crucial role in building Ukraine’s deterrence capabilities.

Germany’s economy has developed formidable strengths in the automotive, machine engineering, and chemical industries over the past few decades, leading to its export-oriented position in the global economy. This has changed significantly, especially over the past five years, as global competitors have improved their research and development in all kinds of industrial sectors, their labor force skills, and their knowledge. More robust supply chains and much lower energy costs have also contributed to the successes of foreign economies, mostly in the Indo-Pacific region and in South America.

Der Beitrag Waiting for the Big Bang: Executing the European Defense Build-Up in Germany erschien zuerst auf Atlantik-Brücke e.V..

by Kai Müller and Dr. Sören Pippart

1. Context and importance of the topic

Electric mobility is designed to change our understanding of mobility. There is no doubt that electric mobility will exactly do that, eventually. In the meantime, recent developments have not corresponded to the public’s and industry’s expectations. Sales figures for electric vehicles being lower than expected may be the obvious sign for challenges the European and US automotive industry are facing. The underlying circumstances, however, are that electric mobility and in its core the battery cell industry have increasingly become the focus of global industrial and trade policy.

Unlike Europe and the US, China recognized the strategic importance of battery cells and associated supply chains early on. Consequently, it not only has secured access to critical minerals essential for the production of battery cells. China also commands most of the world’s refining capacities for lithium, cobalt, and natural graphite.

[related]Although later than China, the United States has responded with an equally determined approach. The Inflation Reduction Act (IRA) mobilizes billions of dollars in incentives for clean energy industries. Despite the Trump Administration changing key aspects of the IRA, important subsidies for the battery cell industry remain. Battery cell manufacturers continue to earn production subsidies of up to 45 USD/kWh for battery cells and battery systems if they meet certain requirements. Additional measures taken by the US to secure access to and processing capacities of critical minerals are the deployment of the Defense Production Act and the inception of the Minerals Security Partnership.

Canada, in the meantime, has positioned itself as an attractive location for investments in the battery cell supply chain. Most recently, the Building Canada Act aims to facilitate investments into strategic relevant sectors such as, among others, clean energy and critical minerals. To support this undertaking, Prime Minister Mark Carney has launched the Major Projects Office that “will work to fast-track nation-building projects by streamlining regulatory assessment and approvals and helping to structure financing.”[1]

Europe, in comparison, lags behind. The EU Critical Raw Materials Act of 2023 sets ambitious targets but offers little in terms of concrete measures. Trade agreements with key resource partners, such as Chile, Australia, and Indonesia remain in interim or negotiating state. At the same time, the EU state aid framework does not allow member states to offer output-based production support, while alternative solutions are impeded by legal and budgetary constraints. European companies are left at a disadvantage compared to competitors in China and the US.

The battery cell industry is of strategic importance for Europe. It will be the backbone of Europe’s automotive sector in the future. A sector that employs 12.9 million Europeans and represents 6.5% of EU GDP.[2] Recent challenges are exemplified by Germany’s automotive industry losing 7% of its workforce within the last year.[3] Besides, battery cells are indispensable for the integration of renewable energy into Europe’s grids. Without a domestic battery value chain, Europe risks losing both industrial competitiveness and the capacity to deliver on its climate targets.

With Northvolt and Cellforce having collapsed, European players in the battery cell industry remain scarce. PowerCo, with facilities under construction in Germany, Spain, and Canada, underlines Europe’s ability to act as a transatlantic player. Yet without an enabling framework at EU-level, structural disadvantages remain. In the following, this article focuses on four key aspects of trade points of vulnerability in the battery cell industry, namely, (i) critical minerals, (ii) manufacturing equipment, (iii) clean and affordable energy, and (iv) steel and aluminum. Subsequently, it will discuss policy challenges as well as recommendations, followed by concluding remarks.

2. Trade points of vulnerability

Critical minerals

China’s dominance in the access to and processing of critical minerals creates the single greatest vulnerability. Lithium, nickel, manganese, cobalt, and graphite are indispensable to NMC and/or LFP battery cell chemistries. While deposits are distributed globally, China has secured access to critical minerals at an early stage via corresponding foreign direct investments. Furthermore, processing capacities for critical minerals are very much concentrated in Chinese hands: China refines more than 70% of lithium, 75% of cobalt, and over 90% of natural graphite.[4]

This dominance is not accidental. Chinese firms enjoy access to state-backed financing, rapid permitting, and vertically integrated industrial planning. They have secured equity stakes and offtake agreements in key resource regions, including the Democratic Republic of Congo for cobalt, Chile for lithium, and Canada for nickel and rare earths.[5]

Likewise, the United States has deemed critical minerals as strategically important. In March 2022, the Defense Production Act was invoked by President Biden with the clean energy transition in mind. The goal is to increase the extraction of critical minerals such as lithium, nickel, cobalt, manganese, and graphite. To support this undertaking, the Department of Energy provides loan guarantees and equity financing. The free trade agreements the US has in place with countries like Australia and Chile are an additional advantage in this regard. Furthermore, the US has initiated the Minerals Security Partnership which aims to accelerate “the development of diverse critical minerals supply chains in cooperation with industry and other governments to support strategic projects and encourage investment throughout the value chain by reputable mining companies.”[6]

Europe, in turn, is in the midst of defining how the access to critical minerals can be secured. Currently, Europe has almost no refining capacity, limited mining, and weak investment mobilization. It remains exposed to Chinese processing capacity, without comparable instruments to mitigate the risk. The Critical Raw Materials Act aims for 10% domestic extraction, 40% processing, and 15% recycling of strategic materials by 2030.[7] But it does not match these targets with funding instruments of the scale deployed by China or the US. Strategic dialogues between the EU and the automotive sector have promised actions but delivered little concrete progress so far.[8]

Manufacturing Equipment

The production of battery cells is technologically challenging and requires highly developed manufacturing equipment. Comparable to critical minerals, the industry’s dependency on China for equipment is high. For instance, the machinery required for coating, formation, and precision assembly is dominated by Chinese suppliers.

Europe as well as the US lack large-scale players with the necessary know-how and production capacity for equipment required to manufacture battery cells. This restriction limits their ability to scale battery production autonomously. Moreover, it exposes the industry to supply disruptions in case of Chinese export restrictions or geopolitical tensions.

Steel and aluminum

Steel and aluminum play a dual role in the battery industry: as components in casings and as essential inputs for building factories. For PowerCo’s Standard Factories in Salzgitter, Valencia, and St. Thomas, steel is among the most important construction materials.

Yet access is distorted by trade frictions. Tariffs on steel complicate supply chains in North America and globally. These frictions can translate into higher costs, slower time-to-market, and delayed projects or in some cases even unviable business cases. While not as existential as critical minerals, steel and aluminum constitute a cost and timing vulnerability that directly impacts competitiveness.

Clean and affordable energy

Selecting a production site is a complicated process that takes a variety of factors into account. One major factor is the price for electricity. As the production of battery cells is an energy-intensive business a consistent access to affordable and low-carbon electricity is required. Low electricity prices are purposefully used by countries and states to attract companies. The words to live by are “industry follows energy.”

Europe suffers from fragmented electricity markets and infrastructure bottlenecks. Particularly Germany faces a structural disadvantage as industrial electricity prices are two to three times higher than in the US or Canada.[9] A widening of price differences cannot be ruled out, as the US is increasingly relying on fossil fuels again. When comparing Germany and China, PowerCo is expected to incur additional energy costs of several hundred million EUR per year compared to a production in China. Without structural measures to ensure affordable energy, Europe risks investment leakage and declining competitiveness across its industrial base.

3. Policy challenges and recommendations

China in the past has already demonstrated its willingness to use its market position as leverage by introducing export restrictions. Such restrictions include the export of rare earths to Japan in 2010, the export of graphite in 2023, and a broader export restriction on rare earths in April of 2025. Such measures underscore the risk of overdependence on a single supplier for critical inputs. In addition, the Chinese government has supported its battery cell industry by investing over 130 billion USD.[10] This has led to production overcapacities which have directly impacted price competition globally.

The United States likewise pursues a dual strategy of subsidies and protectionism. By excluding supply chains that contain “Prohibited Foreign Entities” from IRA Section 45X incentives, the US effectively tailors supply chains to its needs. The US trade policy further complicates supply chains by introducing a variety of tariffs such as the anti-dumping tariff on Chinese anode graphite. Besides, the upcoming review of the USMCA in 2026 might bring substantial changes, particularly with regards to Rules of Origin and possibly Chinese content.

Canada, though rich in resources and aligned with Europe in principle, remains economically strongly oriented towards the US. At the same time, Canada faces significant Chinese investment in its mining sector. In 2024, almost 50% of all new Foreign Direct Investment (FDI) in Canadian mining stemmed from China.[11] However, Canada has previously ordered Chinese miners to divest from lithium holdings and blocked the sale of rare earths to a Chinese entity.[12] On this note, in August 2025, Canada and the EU published a joint declaration of intent on a critical minerals cooperation.

Despite recognizing the strategic importance of batteries, the EU has not matched the policy intensity of its competitors. While the areas of action have been identified, concrete measures regarding the access to critical minerals, output-based production support, local content requirements, or energy prices remain pending. The lethargy of Europe has recently been criticized by Mario Draghi. At a public speech in August, he pointed out that in geopolitical crises, Europe can only watch from the sidelines. The same is currently true for the race to secure a domestic battery cell production and required supply chains.

Therefore, Europe must act now to close these gaps. First, the EU should accelerate investments in critical minerals and processing thereof. This requires mobilizing the European Investment Bank, InvestEU, and the Innovation Fund for strategic projects, combining grants, loans, and equity to crowd in private capital. Important Projects of Common European Interest (IPCEIs) should be extended to cover processing facilities and upstream mining. FDI investment in Canada as a natural partner comes to mind in this regard.

Second, the EU should finalize free trade agreements with Chile, Australia, and Indonesia, among others. These agreements are essential to secure long-term access to critical minerals. Resources that are otherwise being tied up by China and the US.

Third, the EU should support the build-up of European equipment competence. Public-private partnerships between universities, machinery firms, and battery manufacturers can help develop the know-how necessary to reduce reliance on Asia.

Fourth, Europe and in particular Germany need to address their energy disadvantage. An EU framework for affordable industrial electricity prices is required, building on Germany’s national debate. This should be complemented by accelerated investment in renewable energy and transmission infrastructure.

Finally, the EU must recognize that its subsidy structures are out of step with global competitors. While Europe does not need to replicate the IRA, it must ensure that financing instruments are available at comparable scale and practicability to support industrial production and prevent investment leakage. Initiatives like the Battery Booster announced by the European Commission in March 2025 with their limited budget and regulatory restraints cannot fill this gap. The multiannual financial framework for 2028 onwards, on the other hand, could lay the foundation for an impactful industrial policy. However, a potential budget to support the battery cell industry is yet to be allocated, and it is already clear today that this support would arrive late.

4. Conclusion

The global battery race is being won by those who act quickly and decisively. China and the United States are actively securing the foundations of their domestic battery cell industry. China dominates the access to critical minerals as well as their processing and equipment manufacturing. Furthermore, the Chinese battery cell industry heavily benefits from subsidies that enables their players to secure a substantial market share. The United States has followed this approach by introducing and retaining significant parts of the IRA, taking measures to build up a domestic battery cell industry, and protecting their economy from Chinese influence.

Europe on the other hand lags behind. This asymmetry creates a structural disadvantage for European companies, undermining both the automotive sector and the green transition. To remain competitive, Europe must act now. The EU should accelerate investment in critical minerals and processing, finalize trade agreements with resource-rich partners, and support industrial production through European financing instruments and partnerships as well as affordable energy prices. Without such measures, Europe risks losing its automotive value chain, jobs, and economic wealth to global competitors.

Kai Müller is Chief Financial Officer at PowerCo SE. Sören Pippart is Senior Expert for Public Affairs with a focus on North America at PowerCo SE.

About PowerCo SE: PowerCo is shaping the battery future. Founded by the Volkswagen Group in 2022, PowerCo is a globally operating battery cell manufacturer with a strong commitment to sustainability. The company, headquartered in Salzgitter, is rooted in Europe and is responsible for the development and production of battery cells, as well as the vertical integration of the value chain. PowerCo is currently ramping-up three cell factories with a combined capacity of up to 200 GWh per year: Salzgitter in Germany, Valencia in Spain, and St. Thomas in Canada.

Check out our other policy briefs for the Transatlantic Forum on Geoeconomics:

Sources

[1] https://www.pm.gc.ca/en/news/news-releases/2025/09/11/prime-minister-carney-announces-first-projects-be-reviewed-new

[2] ACEA, The Automobile Industry Pocket Guide, 2023.

[3] Deutsche Industrie: Umsatzrückgang und Stellenabbau im zweiten Quartal | EY – Deutschland.

[4] International Energy Agency, Global Critical Minerals Outlook, 2023.

[5] Natural Resources Canada, Critical Minerals Strategy, 2022. Asia Pacific Foundation of Canada, Investment Monitor 2022.

[6] https://www.state.gov/minerals-security-partnership.

[7] European Commission, Critical Raw Materials Act, 2023.

[8] European Commission, Strategic Dialogue on Sustainable Raw Materials for Europe’s Automotive Industry, 2021.

[9] Eurostat, Industrial Energy Prices, 2023; US Energy Information Administration, Industrial Electricity Prices, 2023.

[10] BloombergNEF, Battery Subsidy Tracker, 2023.

[11] https://www.atlantik-bruecke.org/en/kanada-im-visier-der-grossmaechte-welche-optionen-verbleiben-fuer-die-eu/

[12] Canada orders three Chinese firms to exit lithium mining – MINING.COM and Canada blocks Chinese rare earths deal in Trudeau-led crackdown – MINING.COM.

Der Beitrag Points of Vulnerability in the Battery Cell Industry erschien zuerst auf Atlantik-Brücke e.V..

Much has been said about the unequal terms of the US-EU trade deal reached in Turnberry, Scotland, in July. Two camps have emerged: those who see Europe as having prematurely capitulated to US coercion and those who see Europe as having had little choice.

By Elizabeth Baltzan

Any assessment of the outcome of the Turnberry negotiations—and, therefore, any assessment of where to go from here—hinges not on the negotiations themselves but on the amount of leverage the two parties brought to Turnberry. The European Union (EU) had less of it. Europeans have a goods export dependency on the United States that the United States does not have with any country, let alone those in Europe. This asymmetry is long-standing, an outcome of the post-war trade system that emerged after Bretton Woods. That system was grounded in a model of export-led growth. As the richest market and with the lone currency pegged to gold, the United States was the target designation for others’ exports, not least so that European countries could earn dollars to rebuild.

US negotiators of that era were comfortable with asymmetrical concessions because they believed the global economy as a whole would grow, aggregate demand would rise, and all trading nations could benefit from increased production. The United States did not undertake these commitments with the expectation that increased imports would come at the expense of US workers or producers. At some point, however, that is just what happened, contributing to the Nixon Shock of 1971. Part of Richard Nixon’s goal in allowing the dollar to float was to correct for overvaluation that had depressed US export competitiveness. The accession of China’s non-market economy to the World Trade Organization (WTO) in 2001 accelerated US deindustrialization and, along with it, the loss of jobs that had provided many blue-collar Americans with lifelong economic security. Today, this is known as the China Shock.

“The last three years have exposed all too well, exports are not the only area of asymmetrical European dependency.”

As the last three years have exposed all too well, exports are not the only area of asymmetrical European dependency. The EU has also relied on the United States for its security—another outgrowth of the post-war environment. The United States was not only the market of first and last resort, but Europe’s security guarantor. To be sure, this was not an altruistic undertaking. The United States sought to keep Europe democratic and market oriented, part of an overall effort to fend off the threat of communist encroachment.

European prosperity flourished. Today, more than half the Group of Seven (G7)—the club of rich countries—comprises European democracies as well as all three former Axis powers. Nevertheless, these dependencies persisted.

The China Shock, the financial crisis, and popular backlash

As the China Shock began to unfold in US communities, the 2008 financial crisis and resulting recession severely widened inequality and aggravated precarity in many of those same communities. The one-two punch of deindustrialization and the Great Recession sparked popular backlash against a global governance regime seen as serving the interests of elites at the expense of the middle and working classes. In retrospect, this backlash can be understood as the beginning of the end of the United States’ willingness to serve as the market of first and last resort.

[related]In 2013, academics began to document the China Shock, formally publishing the results of their work in 2016. These results showed that US imports from China had caused a significant loss of manufacturing jobs, concentrated in particular regions, with economic effects that lasted throughout workers’ lifetimes. The researchers also linked the China Shock to electoral outcomes. In 2015, the Chinese government adopted a Made in China 2025 industrial strategy that promised to transform China into a producer and innovator of cutting-edge goods. The combination of the China Shock and Made in China 2025 triggered a profound and rapid shift in US thinking. Policymakers who had supported the effort to create a global free market confronted the rise of a non-market economy that was dominating one critical industrial sector after another. Made in China 2025 sought to expand that dominance from steel, aluminum, and glass to advanced sectors such as electric vehicles, robotics, and aerospace. It was precisely to avoid that kind of dominance that the architects of Bretton Woods planned to embed antimonopoly rules in the global trading system in 1948.

The “free trade” paradigm breaks down

Made in China 2025 was inspired by Germany 4.0, Germany’s industrial strategy, and both were grounded in export-led growth. As early as the 1970s, the United States complained that Germany was promoting exports at the expense of domestic consumption.

In 1995, Europeans and Americans led the creation of an entirely new trade regime, yet this failed to address the long-standing transatlantic tension of Germany’s export orientation. Moreover, the tariff asymmetry dating back to the founding of the General Agreement on Tariffs and Trade (GATT) lingered; the US tariff cap was 3.4 percent, while Europe’s was 5 percent. While the United States sought to use the narrower tools of trade remedies (known as “trade defence” in Europe), the WTO Appellate Body over time eroded the strength of those tools, even creating commitments that the parties had expressly declined to make during negotiations. The EU has been well aware of this dynamic, having lost the first of several disputes involving one of the commitments in question.

The 2016 double shock of Brexit and the election of Donald Trump should have served notice that popular discontent was manifesting as an angry rejection of the system as a whole. Yet trading partners who had come to rely on export-led growth largely rejected calls for change, instead pressing for more of the same. Similarly, despite a clear message that NATO partners needed to bear more of the burden of collective security, now-wealthy allies neglected to step up.

The COVID-19 pandemic drove home the vulnerability that comes with that kind of domination. Not only did shortages of personal protective equipment prove lethal, but production around the world was hamstrung when Chinese lockdowns persisted.

The Biden reset and Trump 2.0

The Joe Biden administration came into office offering strong support for the transatlantic relationship, from declaring a truce on rancorous trade disputes like Boeing-Airbus in 2021 to providing military support to Ukraine in the wake of its invasion by Russia. Europeans consistently expressed fear of a second Trump administration but, in the end, seemed disinclined to do much to bolster the Biden administration’s efforts to address the core challenge of US deindustrialization. The European posture was infused with a conviction that the only proper course was restoration of the status quo ante. Early on, one European paper characterized Biden as “Trump with manners,” a line that administration officials would routinely hear in person. To meet climate commitments, as well as to begin to address deindustrialization, the United States enacted the Inflation Reduction Act (IRA). Europeans responded by complaining that the IRA represented a “continuation of President Trump’s hard-nosed America First policies.” A more pragmatic and less ideological analysis revealed that the IRA played to European manufacturing strengths and thus presented an opportunity, rather than a constraint, for European exporters.

“Europe risks not only the loss of export opportunities to the United States, but the possibility that the European market will itself become the destination of choice for the next China Shock.”

Now we have the second Trump administration. It is indeed engaged in hard-nosed “America First” policy, deploying tariff authorities in unprecedented ways while criticizing trading partners for regulating their economies contrary to the preferences of some US multinational corporations—the very thing the Biden administration had declined to do. This policy led not only to Turnberry, as the Europeans felt a trade war would lead to an even worse outcome, but to an ongoing discussion about European regulatory sovereignty.

The EU position is more precarious still. Europe risks not only the loss of export opportunities to the United States, but the possibility that the European market will itself become the destination of choice for the next China Shock. All this is happening as the Trump administration expresses fatigue with guaranteeing Europe’s security.

The way out

Is there a way out of this downward spiral? Yes. But it requires policymakers around the world to spend less time pining for the past and more time focused on what to build next.

Fortunately, there are signs that a shift is taking place. Germany’s willingness to remove the debt brake for defense spending suggests that the long-standing goal of having Germans consume more and export less might indeed be coming to pass—all while addressing outsized dependence on the United States for security. It is a fraught debate. If Germany pairs military Keynesianism with austerity, the result could be an acceleration of authoritarian sentiment reminiscent of the policies that ushered in the end of the Weimar Republic. Still, the shift in approach is a positive step.

Germany’s efforts have been followed by a pledge for Franco-German cooperation, signaling a shared commitment to charting a new path for Europe to extricate itself from these challenges. On a still broader European scale, the recent report by Mario Draghi rightly argues that the EU must do more to integrate and unleash the power of the internal market.

Similarly, there are signs that China is wrestling with the harmful consequences of its economic model. Xi Jinping recognizes that fierce internal competition leads to excessive production (much of which is then exported). As finance professor Michael Pettis has argued for years, China must find a way to encourage greater domestic consumption, relieving the emphasis on exports that is problematic for advanced economies and has also contributed to premature deindustrialization in less advanced economies.

“If other governments succeed in reducing their dependencies, the United States will have less influence.”

The United States must also adjust. If other governments succeed in reducing their dependencies, the United States will have less influence. Shifting overnight to a world of pure power politics, coupled with the erosion of US domestic rule of law, will have implications for the long-term viability of the dollar as the reserve currency. That, in turn, will have implications for the servicing of US debt, which is expected to grow as a result of the One Big Beautiful Bill.

The answers suggested here lie principally in the domestic policies of each relevant economy. Many trade experts reach for trade tools, such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and other free trade agreements (FTAs), as the escape hatch. Yet too few understand what these agreements actually do: They lock in existing supply chains rather than diversify them. This is especially true for intermediate goods. If Europe is looking to further strategic autonomy by diversifying away from existing dependencies—one of the goals of the Franco-German alliance—then signing agreements that incentivize half the content of an FTA good to come from non-FTA partners will not do the trick.

None of these transitions is without cost or pain. Europe has struggled for decades to complete the internal market. Still, even the shock of the first Trump administration did not move Europeans to minimize their exposure in any significant way. Weighing existential threats to Europe, Draghi—who recognizes the shortcomings of the old system—pleaded before the European Parliament: “Do something!”

China’s reorientation of its economy toward consumption will not be easy either, which is why it has not yet happened. But the potential consumption power of its huge domestic market means that China is not fated to play the role of a predatory global monopolist, distorting markets and crushing the ability of market-oriented producers to compete.

The biggest obstacle to moving toward a global trading system more suited to contemporary circumstances might be intellectual: the lingering belief that there is, in essence, only one way to do globalization and it was done in 1995. History tells us otherwise. The previous great globalization boom was grounded in UK hegemony, colonialism, and the gold standard. This model also once seemed inexorable. Yet the onset of World War I proved the beginning of the end. Countries struggled for two decades thereafter to salvage the gold standard, but they were eventually forced to accept the demise of what John Maynard Keynes referred to as a “barbarous relic”—and to come up with something else.

The post-war regime, suited for its era, encouraged dependencies that shifted over time from beneficial to unhealthy. We are now living through a period in which the adverse consequences of those dependencies have become manifest. Just as the architects of the post-war vision summoned the courage and imagination to create a new system to foster peace and stability, so must we.

Elizabeth Baltzan is a Senior Fellow at the Atlantic Council GeoEconomics Center and a former Senior Advisor to the US Trade Representative. 

Check out our other policy briefs for the Transatlantic Forum on Geoeconomics:

„Points of Vulnerability in the Battery Cell Industry“ by Kai Müller, Chief Financial Officer at PowerCo SE. and Sören Pippart, Senior Expert for Public Affairs at PowerCo SE.

„The dollar in the fight for US primacy“ by Martin Mühleisen, former International Monetary Fund (IMF) official and nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„Waiting for the Big Bang: Executing the European Defense Build-Up in Germany“ by Robin Fehrenbach, Director of Research and Documentation at Atlantik-Brücke, Jakob Flemming, Senior Program & Research Manager at Atlantik-Brücke and Julia Friedlander, CEO of Atlantik-Brücke

„How to dismantle a reserve currency“ by Daniel McDowell, nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„The summer of AI action plans“ by Alisha Chhangani, assistant director at the Atlantic Council GeoEconomics Center and Ananya Kuma, deputy director, Future of Money, at the Atlantic Council GeoEconomics Center.

Der Beitrag The road to Turnberry erschien zuerst auf Atlantik-Brücke e.V..

Among the high-level speakers were Vice Chancellor and Federal Minister for Economic Affairs and Climate Action Robert Habeck, the Netherland’s Deputy Prime Minister and Minister of Finance Sigrid Kaag, and the United States Trade Representative Katherine Tai. Their keynotes as well as the panel discussions at the Transatlantic Forum made it clear: We live in a new era of geoeconomics. That is why we are looking forward to the Transatlantic Forum on GeoEconomics 2024 to continue the transatlantic dialogue on crucial issues at the nexus of economic and foreign policy.

DZ BANK generously hosted this year’s conference. Bloomberg was the media partner of the Transatlantic Forum.

You can watch the recording of the conference here:

[toggle title=”Welcoming Remarks”]

Souâd Benkredda, Member of the Board of Managing Directors, DZ BANK

Sigmar Gabriel, Chairman, Atlantik-Brücke

Fred Kempe, President and Chief Executive Officer, Atlantic Council

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[toggle title=”Session I – Building common ground: Transatlantic approaches to economic statecraft”]

Michael Lieberman, Assistant Director for Enforcement, Office of Foreign Asset Control, US Department of the Treasury

David Lim, Co-Director, Task Force KleptoCapture, US Department of Justice

David Reed, Director, Sanctions Directorate, UK Foreign, Commonwealth & Development Office

Darta Tentere, Policy Advisor to the EU Sanctions Envoy David O’Sullivan, European Commission

Moderated by Kim Donovan, Director, Economic Statecraft Initiative, GeoEconomics Center, Atlantic Council

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[toggle title=”Keynote I – Navigating the geoeconomic era with an open approach”]

Sigrid Kaag, First Deputy Prime Minister and Minister of Finance, Government of the Netherlands 

In conversation with Fred Kempe, President and Chief Executive Officer, Atlantic Council

You can read the full transcript of Minister Kaag’s keynote remarks here

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[toggle title=”Session II – G20, BRICS, and the future of multilateralism”]

Jörg Kukies, State Secretary; Economic, Financial, and Energy Policy Advisor, German Federal Chancellery 

Daleep Singh, Chief Global Economist and Head of Global Macroeconomic Research, PGIM Fixed Income

 Moderated by Stephanie Flanders, Senior Executive Editor for Economics | Head, Bloomberg News | Bloomberg Economics

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[toggle title=”Keynote II – GeoEconomic deepening of transatlantic cooperation”]

Dr. Robert Habeck, Federal Minister for Economic Affairs and Climate Action, German Federal Government

In conversation with Julia Friedlander, Chief Executive Officer, Atlantik-Brücke

You can read the full transcript of Minister Habeck’s keynote remarks here

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[toggle title=”Session III – Adapting at speed: The private sector and geopolitics”]

Nils Aldag, Chief Executive Officer, SunFire

Candace Kelly, Chief Legal Officer, Stellar Development Foundation

Christian Sewing, Chief Executive Officer, Deutsche Bank

Michael Schoellhorn, Chief Executive Officer, Airbus Defence and Space

Moderated by Josh Lipsky, Senior Director, GeoEconomics Center, Atlantic Council

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[toggle title=”Session IV – The clash of economics and national security Trade, industrial policy, and supply chains”]

Elizabeth Baltzan, Senior Advisor to the United States Trade Representative, Office of the United States Trade Representative

Denis Redonnet, Deputy Director-General, Chief Trade Enforcement Officer, EU Commission

Anahita Thoms, Board Member, Atlantik-Bruecke and Partner, Baker & Mckenzie International

Moderated by Sarah Bauerle Danzman, Senior Fellow | Associate Professor, Atlantic Council | Hamilton Lugar School of Global and International Studies

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[toggle title=”Keynote III – A Conversation with US Trade Representative Ambassador Katherine Tai”]

Katherine Tai, United States Trade Representative, Office of the United States Trade Representative

 In conversation with Stephanie Flanders, Senior Executive Editor for Economics | Head, Bloomberg News | Bloomberg Economics

You can read the full transcript of US Trade Representative Tai’s keynote remarks here.

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[toggle title=”Closing remarks”]

Julia Friedlander, Chief Executive Officer, Atlantik-Brücke

Josh Lipsky, Senior Director, GeoEconomics Center, Atlantic Council

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Der Beitrag Transatlantic Forum on GeoEconomics 2023 erschien zuerst auf Atlantik-Brücke e.V..

You can watch the recording of the conference here:

Der Beitrag Frankfurt Forum erschien zuerst auf Atlantik-Brücke e.V..