Pity U.S. government statisticians come February, when they release the trade data for 2025—with numbers that are unlikely to please U.S. President Donald Trump. Despite his insistence that tariffs reduce the U.S. trade deficit, available data suggests otherwise. Over the first 10 months of 2025, the goods deficit widened by $77 billion, or nearly 8 percent, year over year. This trend is unlikely to have reversed once the November and December numbers are in.
An irritated Trump might ask which economy is the biggest perpetrator. For the first time in recent memory, the answer will not be China. Instead, the biggest U.S. trade deficit during the first 10 months of 2025 was with the European Union—around $190 billion, compared to China’s $175 billion. And while China’s surplus with the United States shrunk by 28 percent during this time, the EU’s remained broadly stable compared to the same period one year earlier.
Pity U.S. government statisticians come February, when they release the trade data for 2025—with numbers that are unlikely to please U.S. President Donald Trump. Despite his insistence that tariffs reduce the U.S. trade deficit, available data suggests otherwise. Over the first 10 months of 2025, the goods deficit widened by $77 billion, or nearly 8 percent, year over year. This trend is unlikely to have reversed once the November and December numbers are in.
An irritated Trump might ask which economy is the biggest perpetrator. For the first time in recent memory, the answer will not be China. Instead, the biggest U.S. trade deficit during the first 10 months of 2025 was with the European Union—around $190 billion, compared to China’s $175 billion. And while China’s surplus with the United States shrunk by 28 percent during this time, the EU’s remained broadly stable compared to the same period one year earlier.
It’s easy to imagine Trump ordering his officials to devise a plan to redress the imbalance with the EU. The administration’s recent track record suggests three potential policy proposals: engineering a depreciation of the dollar, shifting defense expenses to Europe, and clinching deals with Russia. These plans could be wild cards for trans-Atlantic relations in 2026.
In a 2024 essay, U.S. Federal Reserve Board member Stephen Miran outlined the contours of the next trans-Atlantic battle. Miran’s thesis is simple: An overvalued dollar widens the U.S. trade deficit by making imports too cheap and exports too expensive. Consequently, U.S. officials might conclude that depreciating the dollar—for example, by compelling foreign holders to sell U.S. Treasurys—would narrow the U.S. trade deficit. Goldman Sachs considers this scenario a wild card to watch for in 2026.
Trump could view the planned G-7 summit in the French spa resort of Evian in June as a golden opportunity to try this approach with EU countries. Together, they own around one-fifth of foreign-held U.S. Treasury securities (about twice as much as Japan, the world’s largest single-country holder of Treasurys). At the summit in June, Trump will meet with the four largest global holders of U.S. Treasurys: Britain, France, Germany, and Japan. Trump could hijack the gathering by telling the assembled leaders that they must sell their stock of U.S. Treasurys or face retaliation. If this pressure is successful with the G-7 economies, then he could turn his sights to other targets, starting with China, at the G-20 summit that he will preside over in Florida six months later.
For Europe, a U.S. request for a Treasury sell-off would be a nightmare. First, European states are not equipped to respond to such demands. European-held U.S. Treasurys are owned by many different investors, including central banks and a myriad of private funds, which makes collaboration impossible. What’s more, a steep depreciation of the dollar—and thus an appreciation of the euro—would be a disaster for European exporters. Many of them consider a weak dollar a bigger concern than U.S. tariffs. In 2025, the greenback lost around 12 percent of its value against the euro—and with nearly one-third of EU exports invoiced in dollars, a further slide of the greenback would be disastrous.
The European debate around the new U.S. National Security Strategy primarily concerns the Trump administration’s attacks on Europe’s democratic and social model. However, other parts of the document are perhaps just as alarming, pointing to a second wild card for trans-Atlantic relations in 2026. The strategy suggests that Washington could soon ask NATO allies to join a burden-sharing network for military expenses. U.S. demands that NATO members spend even more on defense may catch European policymakers by surprise. Many EU capitals believe that the June 2025 NATO pledge for members to spend 5 percent of their GDPs on defense by 2035 resolved this issue once and for all.
Taken together, Washington’s National Security Strategy and its plans for the G-20 presidency reveal the likely future of Trump’s burden-sharing network. The “who” is straightforward: The National Security Strategy makes it clear that the network will be entirely U.S.-led. The strategy document also provides an answer to the “what” question: paying fees to the network will provide access to perks such as U.S. concessions on trade issues (read: tariff relief) and discounts on U.S. military equipment.
Regarding the “when,” the U.S.-led G-20 summit could be a pivotal moment for the United States to issue these demands. In late 2025, Washington announced that Poland would be the only non-G-20 economy invited to the summit. Trump’s decision to pick Warsaw is not random: Poland is NATO’s largest military spender measured by share of GDP, with estimated outlays of nearly 4.5 percent of its GDP in 2025. Trump could use Warsaw’s example to pressure other NATO allies to join his burden-sharing network.
A final wild card concerns the negotiations with Russia and Ukraine. The National Security Strategy highlights the administration’s resource-centric worldview, focusing on securing critical mineral supplies and expanding fossil fuel production. It’s easy to imagine Trump making deals with Moscow in both areas to give U.S. companies an edge over European ones.
First, consider critical minerals. Russia is a major producer of many minerals, including antimony (23 percent of the global supply), magnesite (11 percent), palladium (42 percent), platinum (12 percent), and vanadium (19 percent). A deal to give U.S. companies preferential access to Russian palladium and titanium could put EU firms in a difficult spot. The bloc still relies on Russian supplies for both minerals, which are critical to the automotive and aerospace sectors.
Turning to fossil fuels, two obscure Russian decrees suggest that Washington and Moscow are laying the groundwork for US energy majors to return to Russia. On the day of the summit between Trump and Russian President Vladimir Putin in Alaska in August 2025, Moscow authorized foreign companies to return to the Sakhalin-1 oil and gas field in Russia’s Far East. U.S. oil giant ExxonMobil held a 30 percent share in the project until the Russian government seized its $4.6 billion investment in 2022. ExxonMobil is in luck: In late December 2025, Putin signed another decree that postponed the deadline for the company to finalize the sale of its stake in Sakhalin-1 by one year, to 2027.
Washington knows that fully lifting sanctions on Russia—which include measures from Britain, Canada, Japan, the EU, and the G-7 as a group—is implausible. This may work in Washington’s favor. U.S. energy companies such as ExxonMobil could receive U.S. sanctions waivers to invest in Russia, much like Chevron has received such licenses to operate in Venezuela since 2019. Washington could pursue a similar policy toward Russia, conveniently arguing that it is too early to lift sanctions. Only U.S. firms can receive these waivers, leaving their European competitors subject to continued U.S. sanctions and thus locked out of Russia.
As, French scientist Louis Pasteur liked to say, “Luck only favors the prepared mind.” As European leaders ponder their New Year’s resolutions for 2026, Washington’s surprise seizure of Venezuelan leader Nicolás Maduro on Jan. 3 suggests that EU policymakers may want to consider the wild-card scenarios for trans-Atlantic relations this year. Not much could change Trump’s mind if he embarks on any of these plans, but at least—and with a bit of luck—the bloc’s leaders could try not to be taken entirely by surprise.
