Europe Diversifies as U.S. Tariffs Roil Alliances (Full Transcript)

[00:00:00] Speaker 1: Here's my take. For years now, Europe has been caricatured as too divided to act, too lethargic to decide, too comfortable to think strategically. Yet over the past year, Europe has behaved with a quiet shrewdness that contradicts that stereotype. Faced with an unpredictable United States, it has neither lashed out nor capitulated. Instead, it has adapted. When President Trump returned to office and unleashed the country's highest tariffs in nearly a century, many expected Europe to retaliate. A transatlantic trade war would have fed inflation, disrupted supply chains, and weakened already fragile growth. Europe resisted the temptation. It absorbed the pressure, avoided escalation, and bought time. That restraint prevented a downward global spiral. Then last week, Europe acted. After 25 years of stalled negotiations, EU countries approved a sweeping trade agreement with Brazil, Argentina, Paraguay, and Uruguay. If ratified, it would create one of the world's largest free trade zones by population, more than 700 million people. Nor is the outreach to Latin America an isolated move. In recent weeks, Brussels and Beijing have signaled that they have resolved a fresh set of trade frictions that had threatened to turn into a broader confrontation over EV subsidies and market access. Europe remains wary of China's industrial policies and its political system. But the EU now views China as a necessary partner. At the same time, Europe has accelerated its outreach to Southeast Asia. The EU now has trade agreements in force with Singapore and Vietnam, has concluded negotiations with Indonesia, and is pushing ahead with talks across the region. The region, by the way, is already the EU's third largest trading partner outside Europe. This instinct to diversify is spreading far beyond Europe. Consider Canada. For three decades, Ottawa made a clear strategic bet that its future lay in ever deeper integration with the United States, economically, diplomatically, politically. More than 75 percent of Canadian goods exports flowed south in 2024. It was one of the most successful integration stories of the post-Cold War era. That trust has now been shattered. Trump's tariffs, threats to reopen trade agreements, and bizarre declarations about annexing Canada have forced a rethink. Canada's new prime minister, Mark Carney, has responded by openly seeking distance from Washington. Arriving in Beijing this week, Canada's foreign minister, Anita Anand, put it bluntly, it is necessary for us to diversify our trading partners and to grow non-U.S. trade by at least 50 percent over the next 10 years. That is not hedging. It is a strategic reversal. China's trade data reveal that the world is not de-risking from Beijing, but from Washington. Despite sharply reduced exports to the U.S., China's overall exports continue to rise. Its trade surplus surged to nearly $1.2 trillion in 2025 as shipments to Latin America, Africa, Europe, and much of Asia expanded rapidly. Tariffs did not wall China off from the world. They encouraged many countries to keep trading with Beijing. Public opinion reflects this shift. A major new poll by the European Council on Foreign Relations finds that in key emerging powers, India, Brazil, South Africa, the share of respondents who would prefer their country join an American-led bloc rather than a Chinese one dropped by between 15 and 19 percentage points in just two years. Among 10 European countries, only 16 percent now describe America as an ally. A majority still consider the U.S. a key partner, even as views of China remain mixed rather than warm. As Singapore's former Foreign Minister George Yeo put it recently, Trump is fast-forwarding the future towards multipolarism. What is at stake here is not America's image, but its future power. China is methodically building one of the most resilient economic ecosystems in modern history, dominating critical mineral processing, achieving scale in batteries and electric vehicles, and diversifying export markets to withstand shocks, sanctions, and tariffs. The only credible U.S. response is not tariffs, which over the past year have coincided with declining manufacturing employment, but ecosystem building of our own. The U.S. still has an extraordinary advantage, a vast network of allies and partners that together control most of the world's advanced technology, capital, skilled labor, and consumer demand. In theory, that coalition could source critical materials from friendly countries, spread manufacturing across trusted partners, share research, and anchor markets that remain open and predictable. In practice, America has squandered much of that advantage by treating allies as transactional customers, weaponizing tariffs against them, and turning longstanding commitments into shakedowns. Washington has encouraged others to hedge. Most extraordinarily, the U.S. is no longer the trendsetter. It is retreating to protectionism and nationalism, while the world is searching for more trade and cooperation. For decades, the global order was built on an American platform. Trade flowed through U.S.-designed institutions. Security rested on U.S. guarantees. Crises were managed, for better or worse, by Washington. The global agenda was set in America. That platform still exists, but the world is no longer building on it. It is building around it. President Trump announced additional 10 percent tariffs going to 25 percent on imports from several of America's closest allies, including the U.K., France, and Germany. The move is part of his increasingly serious effort to pressure Denmark to give up the semi-autonomous territory of Greenland. For more, I'm joined by two former top State Department officials. Richard Haass is the president emeritus of the Council on Foreign Relations, served as policy planning director under President George W. Bush, and Marie Slaughter is the CEO of the think tank New America. She held the same job at the Obama State Department. Richard, this strikes me as perhaps the greatest crisis in transatlantic relations, because I mean, you have the NATO member state, the United States, essentially threatening to annex territory from another NATO member state. Where does it go from here?

[00:07:20] Speaker 2: You know, Farid, we talk about all sorts of difficult issues on your show, what to do about China, Gaza, Ukraine, Russia, Venezuela, what have you. This is not a difficult issue. Obviously, we want to have closer security and economic ties with Greenland, and I get it. That's why God invented diplomats. Marco Rubio, the secretary of state, should simply be over there negotiating a mutually acceptable agreement. These tariffs, these threats, this mafia-like talk, you could be forgiven for thinking the United States wants to provoke a crisis with Europe. Europe has been the, shall we say, least favored part of the world for this administration since it took office almost a year ago. So the real question is whether the president backs down and we avoid, if you will, a crisis. Even if that happens, Farid, let's be honest, a lot of damage is already baked into the cake. I think essentially the European, this reinforces the European view that the United States is no longer a partner, can no longer be depended on, reinforces all the doubts that have emerged because of our policy towards Ukraine and Russia. Essentially it's what you were just talking about in your opening statement. This is just going to flip the perception of the United States as an ally, a partner, someone to work with, and increasingly we're either someone to work around or even worse, work against.

[00:08:47] Speaker 1: Henry, when you look at this situation, what do you think the Europeans should do? What are their options?

[00:08:55] Speaker 3: I think it's time for the Europeans to actually fight fire with fire. Your column this week talks about how they have resisted a trade war, how they've pursued a strategy really of broadening their own trade agreements. I agree with that. At this point, I think they have to use what we call the bazooka, which is to impose 25 percent tariffs on the United States, maybe across the board, maybe only on the tech industry. But they have to act as a unified body and they have to put to say enough. Otherwise, it just gets pushed and pushed and pushed. And that's exactly what the president is counting on. At this point, people laugh that he's the biggest force for European integration since Jean Manet. This is NATO. And I agree. I agree with Richard. I think the damage here for NATO is probably lasting no matter what happens. But if Europe really wants to say enough, they've got to really strike back hard.