\n
<\/p>\n
Pity U.S. government statisticians come February, when they release the trade data for 2025\u2014with 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\u00a0percent<\/a>, year over year. This trend is unlikely to have reversed once the November and December numbers are in. <\/p>\n 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\u2014around $190 billion<\/a>, compared to China\u2019s $175 billion<\/a>. And while China\u2019s surplus with the United States shrunk by 28 percent during this time, the EU\u2019s remained broadly stable compared to the same period one year earlier.<\/p>\n<\/p><\/div>\n Pity U.S. government statisticians come February, when they release the trade data for 2025\u2014with 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 <\/span>nearly 8\u00a0percent<\/span><\/a><\/u><\/span>, year over year. This trend is unlikely to have reversed once the November and December numbers are in. <\/span><\/p>\n 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\u2014around <\/span>$190 billion<\/span><\/a><\/u><\/span>, compared to China\u2019s <\/span>$175 billion<\/span><\/a><\/u><\/span>. And while China\u2019s surplus with the United States shrunk by 28 percent during this time, the EU\u2019s remained broadly stable compared to the same period one year earlier.<\/span><\/p>\n It\u2019s easy to imagine Trump ordering his officials to devise a plan to redress the imbalance with the EU. The administration\u2019s 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.<\/p>\n In a 2024 <\/span>essay<\/span><\/a><\/u><\/span>, U.S. Federal Reserve Board member Stephen Miran outlined the contours of the next trans-Atlantic battle. Miran\u2019s 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 <\/span>depreciating the dollar<\/span><\/a><\/u><\/span>\u2014for example, by compelling foreign holders to sell U.S. Treasurys\u2014would narrow the U.S. trade deficit. Goldman Sachs considers this scenario a <\/span>wild card<\/span><\/a><\/u><\/span> to watch for in 2026.<\/span><\/p>\n 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 <\/span>one-fifth<\/span><\/a><\/u><\/span> of foreign-held U.S. Treasury securities (about twice as much as Japan, the world\u2019s 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 <\/span>China<\/span><\/a><\/u><\/span>, at the G-20 summit that he will preside over in Florida six months later.<\/span><\/p>\n 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\u2019s more, a steep depreciation of the dollar\u2014and thus an appreciation of the euro\u2014would 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\u2014and with nearly <\/span>one-third<\/span><\/a><\/u><\/span> of EU exports invoiced in dollars, a further slide of the greenback would be disastrous.<\/span><\/p>\n The European debate around the new U.S. <\/span>National Security Strategy<\/span><\/a><\/u><\/span> primarily concerns the <\/span>Trump administration\u2019s attacks on Europe\u2019s<\/span><\/a><\/u><\/span> 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 <\/span>5 percent<\/span><\/a><\/u><\/span> of their GDPs <\/span>on defense<\/span><\/a><\/u><\/span> by 2035 resolved this issue once and for all. <\/span><\/p>\n Taken together, Washington\u2019s National Security Strategy and its plans for the <\/span>G-20 presidency<\/span><\/a><\/u><\/span> reveal the likely future of Trump\u2019s burden-sharing network. The \u201cwho\u201d 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 \u201cwhat\u201d 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.<\/span><\/p>\n Regarding the \u201cwhen,\u201d 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 <\/span>Poland<\/span><\/a><\/u><\/span> would be the only non-G-20 economy invited to the summit. Trump\u2019s decision to pick Warsaw is not random: Poland is NATO\u2019s largest military spender measured by share of GDP, with estimated outlays of nearly <\/span>4.5 percent<\/span><\/a><\/u><\/span> of its GDP in 2025. Trump could use Warsaw\u2019s example to pressure other NATO allies to join his burden-sharing network.<\/span><\/p>\n A final wild card concerns the <\/span>negotiations with Russia and Ukraine<\/span><\/a><\/u><\/span>. The National Security Strategy highlights the administration\u2019s resource-centric worldview, focusing on securing critical mineral supplies and expanding fossil fuel production. It\u2019s easy to imagine Trump <\/span>making deals with Moscow<\/span><\/a><\/u><\/span> in both areas to give U.S. companies an edge over European ones. <\/span><\/p>\n First, consider critical minerals. Russia is a <\/span>major producer<\/span><\/a><\/u><\/span> of many <\/span>minerals<\/span><\/a><\/u><\/span>, 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 <\/span>palladium<\/span><\/a><\/u><\/span> and <\/span>titanium<\/span><\/a><\/u><\/span> 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. <\/span><\/p>\n 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 <\/span>authorized<\/span><\/a><\/u><\/span> foreign companies to return to the Sakhalin-1 oil and gas field in Russia\u2019s Far East. U.S. oil giant ExxonMobil held a <\/span>30 percent <\/a>share<\/a><\/span><\/u><\/span> 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 <\/span>decree<\/span><\/a><\/u><\/span> that postponed the deadline for the company to finalize the sale of its stake in Sakhalin-1 by one year, to 2027. <\/span><\/p>\n Washington knows that <\/span>fully lifting sanctions on Russia<\/span><\/a><\/u><\/span>\u2014which include measures from Britain, Canada, Japan, the EU, and the G-7 as a group\u2014is implausible. This may work in Washington\u2019s 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 <\/span>since 2019<\/span><\/a><\/u><\/span>. 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.<\/span><\/p>\n