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- [00:00]
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Bloomberg Audio Studios Announcer
Bloomberg Audio Studios Podcasts Radio news.
- [01:39]
European Commentator
Certain places in Europe are not even recognizable, frankly, anymore. They're not recognizable.
- [01:45]
David Gura
In his second term, President Donald Trump has been upending global trade and breaking geopolitical norms faster and more dramatically than in his first. And a lot of that is playing out with his relationship to Europe.
- [01:57]
European Commentator
I love Europe and I want to see Europe go good, but it's not heading in the right direction.
- [02:04]
David Gura
After a striking speech from the president in Davos last week, where he ratcheted up the pressure on countries who opposed his goal of acquiring Greenland, European leaders gathered at an emergency meeting to consider how to respond. The mood was grim.
- [02:17]
Suzanne Lynch
The word shell shocked is not too much of an exaggeration.
- [02:21]
David Gura
Suzanne lynch is Bloomberg's Brussels bureau chief.
- [02:24]
Suzanne Lynch
I think the feeling in Europe after Donald Trump reiterated his threat to annex Greenland and to tariff to put extra tariffs on a number of European countries over their opposition to Trump's plans on Greenland really took European leaders by surprise.
- [02:43]
David Gura
Just a few months ago, the US and the European Union agreed to a new trade deal. But European leaders suspended the approval of that deal in response to Trump's tariff threats over Greenland. Hours later, Trump walked them back. Now many leaders in Europe feel like the time has come to reconsider the continent's relationship with the US On a fundamental level and to be prepared to push back even harder.
- [03:08]
Suzanne Lynch
I think what they're wondering now is can they trust the United States administration? What happens if in two or three weeks, in two or three months, Donald Trump again threatened tariffs or indeed threatens to annex Greenland again? Should the European Union be more forceful and be ready for this kind of action by the president and really stand up to the US In a stronger way if this happens again?
- [03:29]
David Gura
Suzanne says it'll take time for the European Union's 27 member states to align on what to do next. But one thing seems clear.
- [03:38]
Suzanne Lynch
Europe feels that the United States has crossed a Rubicon here, that it cannot depend on the United States as an ally either in the defence or in the economic sphere, and that really, Europe has to look after itself.
- [03:55]
David Gura
I'm David Gura and this is the big take from Bloomberg News today on the show, how Europe could fight back against the US as it makes moves to stand alone. President Trump's threat to punish European nations with additional tariffs is the latest chapter in what's shaping up to be a long story. But his speech at Davos last week led to more serious talk among European leaders about how they should respond and how they could retaliate. I asked Bloomberg Suzanne lynch, what tools Europe has to push back on the US And President Trump, starting with what's been called the trade bazooka, the Anti Coercion instrument, or aci.
- [04:37]
Suzanne Lynch
It's one of these acronyms, the aci, that the EU loves to use, but it's important. Look, this was a new tool that the EU agreed on a few years ago, and really its objective was to potentially counter China in the future. They didn't necessarily think it would be something they might use for the United States, but here we are.
- [04:55]
David Gura
Can you explain what that is exactly and how it would work if it were implemented?
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Suzanne Lynch
It would allow the European Union, it would have to agree to this, a majority of countries to hit back on the United States if it felt, or other countries if it felt it was engaging in coercive trade practices. And then once they would make that decision, then they would have to take another vote on what measures to take. So in other words, we don't know what measures yet. They would have to decide that. But what this tool does allow the EU to do is hit really the services sector. For example, potentially increased taxes on US Tech companies, curb US Access to procurement markets in the European Union. These are the kind of trade connections and deep links that the United States services industry, the United States tech companies have into the European Union. They're less easy to quantify. They're not just products getting on ships and moving between Europe and America. But the Europeans feel that they really could hit America hard with this, and the US Knows this.
- [05:58]
David Gura
In the days leading up to President Trump's speech in Davos, Suzanne says the pressure was building within the EU to consider using that trade bazooka. Trump's decision to take those additional tariffs off the table has alleviated some of that pressure, but it's left many EU leaders feeling unsure that the status quo will hold.
- [06:17]
Suzanne Lynch
The question is, will they do that again? And I think, look, there's a broader issue and a broader soul searching going on in Europe now about how they've handled Donald Trump for years, for decades. The European Union always said, and rightfully so, that their big plus, their big advantage is their single market. The EU is a market of 450 million people. It's a very, very important trade partner for the United States. It's got a lot of power in the regulatory space, for example, regulating tech companies. So its force as an economic power is much more powerful than its force as a defense power, for example. That's more for NATO, not the European Union. Last summer, it agreed on this trade deal that was pretty much suboptimal for the eu. And now there is a school of thought that that was a strategic blunder by the eu. So I think now the conversation is that the EU needs to show, according to some people, that it's got the muscle for the fight. It's got the appetite for a fight if it needs to. And in the meantime, it's looking to try and strengthen its own single market, get rid some of that regulatory burden that's holding back investment in Europe, that's holding back the development of the capital markets unions in Europe, and it's holding back businesses in Europe because this is something that the EU does need to work on and try and close that competitiveness gap that it has with the United States.
- [07:31]
Interviewer
If Europe doesn't reach for that bazooka, are there smaller weapons of retaliation that Europeans can go to?
- [07:39]
Suzanne Lynch
There are. I mean, the other main option it had and has is that it has, has a series of countermeasures of tariffs that it could impose very quickly if it needed to. And that's about 93 billion euro worth of tariffs. They could hit US goods with, and these are, if you like, on the books. And they could be activated if these tariff threats return or if Donald Trump acts again in a more coercive manner towards the EU when it comes to trade.
- [08:11]
David Gura
Another option, Europe, could target the US Tech sector.
- [08:15]
Suzanne Lynch
The EU has huge regulatory oversight into tech companies and most of the big tech and social media companies operating in Europe are American. Now with a lot of figures close to Donald Trump, people like JD Vance taking a big interest in US Tech companies. So, like, that is also something to watch. How does the EU respond in terms of its regulatory powers? Look, the European Commission is saying all the time that it looks at each on a case by case basis that it does not have a bias against the United States. But ultimately, this is something that the EU does have power over when it comes to US Tech companies operating in Europe.
- [08:53]
Interviewer
There was this moment during Davos when a Danish pension fund offloaded a bunch of U.S. treasuries. And we saw the Treasury Secretary, Scott Bessant, downplay that. He talked about Denmark's insignificance and the insignificance of what that pension fund did. But then President Trump had kind of a totally different answer. He seemed a lot less blase about that effort to get rid of US Treasuries.
- [09:13]
David Gura
How do you think about that moment.
- [09:15]
Interviewer
In the context of potential retaliation, the kind of financial might that these countries.
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David Gura
Could bring to bear?
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Suzanne Lynch
It's been a fascinating topic of discussion here. Yeah, absolutely. I mean, this idea that trading partners of the United States, investors in the United States, could use their leverage as holders of US Bonds is a fascinating one. We reported during the week that this particular Danish pension fund was going to sell off 100 million doll dollars in US treasuries. And however, look, in one way this is, this is small fry when it comes to the bigger picture of the amount of Treasuries that are out there. But at the same time, I do think it is given some people, at least in the administration, maybe I just say Donald Trump himself. Food for thought about this reality about the stock of US Treasuries, the reputation of US Treasuries and the ability of others to hit back, even though a lot of these Treasuries are in fact held privately.
- [10:14]
David Gura
Coming up next, President Trump says he's reached a framework deal with NATO over Greenland's future. Will it de escalate tensions between the US and the EU or make them worse? The reversal happened in just a few hours. President Trump went from threatening Europe on the world stage to announcing in a social media post that he and NATO Secretary General Mark Rutte had agreed on a framework for a future deal with respect to Greenland and as the President put it, the entire Arctic region. Trump also walked back his tariff threats. But whether that deal could de escalate tensions with the EU remains to be seen. I asked Bloomberg's Suzanne lynch what we've learned about that framework agreement since Trump announced it.
- [11:06]
Suzanne Lynch
I think what's very interesting about this is that in one way, a lot of what this deal seems to be emerging, as are a lot of the ideas that the Europeans had been suggesting to the US Administration in the days running up to Davos, this idea that NATO itself could expand and bolster its presence in the Arctic. So, I mean, I think that's important to say that even though, as we know, Mark Rutte, the NATO Secretary General, did have a big role in convincing Donald Trump on Wednesday in Davos to row back from his threats. I think, interestingly, there were some back channels and some discussions about this beforehand. Now, what is different is that we heard Donald Trump talking, for example, about a golden dome in Greenland during his speech at Davos.
- [11:55]
Interviewer
This missile defense system like the one that exists in Israel.
- [11:58]
Suzanne Lynch
Exactly. He mentioned that specifically Bloomberg was reporting during the week that the US wants to rewrite its 1951 agreement with Denmark so that any military presence can be limited in Greenland. We also know that there is going to be more of a presence of the United States in Greenland. Now, I mean, the Danes have been saying from the get go that the United States made the decision to take out their military from Greenland to dial that down, and they were welcome to, to dial that back up at any, any point. But look, we do know that this framework deal will entail the stationing of U.S. missiles, will involve mining rights that are aimed at keeping Chinese interests out, and will involve a bolstered NATO presence in the Arctic.
- [12:46]
Interviewer
How do the Danes and Greenlanders feel about both the framework for this deal and also the process by which we've gotten to this point?
- [12:53]
Suzanne Lynch
Look, this is a huge subject, a huge topic for Denmark. It's a small country, but it's a powerful country. Denmark has been a member of the European Union for over 50 years now. It was one of the earlier members of the Union. Its Prime Minister, Meta Fredericksen, is very well known, very, very prominent figure on the European political scene. And it was interesting that she made the point that she welcomed the development last Wednesday in Davos, where Donald Trump agreed to a framework deal. She welcomed the move by Mark Rutte, but she also made the point that Rutte could not negotiate on behalf of Denmark. That's not his prerogative, as she thought. And of course, the two governments are saying that the government in Greenland and Denmark, that the island is not for sale, that sovereignty is not up for discussion, but that they're open to talks on issues like security and economic development. But look, undoubtedly this has really taken, you know, the Danish people, the Danish government and the people of Greenland by surprise. And one of the objectives for Mette Frederiksen as prime minister of Denmark is to ensure that the European Union and more importantly, really, that NATO is behind Denmark and has got its back.
- [14:06]
David Gura
A question for you, Suzanne.
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Interviewer
That's kind of geopolitical meteorology. I'm wondering how much the temperature has come down as a result of President Trump backtracking in the way in which he has.
- [14:15]
Suzanne Lynch
Yeah, I mean, the way I put it during the week when we were writing about this so much, I mean, it was such a big moment, was, you know, the crisis had been averted, that is for sure. But I think the trust has been completely broken. There's no doubt. I think there's been a lot of wishful thinking that, you know, ultimately the transatlantic alliance will get through this, that Donald Trump, particularly after last summ, when the NATO summit that happened in the Hague went off pretty well, European allies, members of NATO, agreed to increase their spending of 5% of GDP. Donald Trump left the Hague a happy person, back to America claiming and rightly saying that he had succeeded in encouraging European members to cough up more for the alliance and seemed to be committed to that. So I think there was a sense that things were going to be back on track. But this Greenland issue has really, really taken people by surprise and there's been a lot of anger. Look, I think at the summit on Thursday, the overwhelming view was we're shaken by this and we are no longer going to be naive, but let's try and be pragmatic about this and get this relationship back on track. I think weighing on minds is the serious issue of Ukraine. The Europeans know that they need the United States to remain engaged in this, and that is of existential importance to Europe. But at the same time, I think they've learned their lesson that ultimately they need to be able to stand on their own two feet and have more strategic autonomy, as the new phrase is going. In one way, this should not be a surprise. I mean, Donald Trump is someone who is instinctively skeptical of multilateral institutions and the European Union. This idea of a collection of 27 countries is not something he warms to. So I think in a way, the European Union needs to accept that, quite frankly, it needs to understand that Donald Trump and this White House doesn't really see the EU in the same positive terms that American leadership did, particularly in during the foundation of the European Union after World War II, as a stabilizing force, as a force for economic good in Europe. Instead, the Trump administration sees it in a very different way, as a kind of fading block and a fading power, and it prefers to do business elsewhere.
- [16:28]
David Gura
Suzanne says that what many European leaders recognize is that there are other benefits to charting a more independent path forward beyond protecting Europe itself from the whims of President Trump.
- [16:39]
Suzanne Lynch
The reality, if we step back a bit, is that Europe as a major economic power has obviously been losing ground relative to China in particular, as indeed has the United States. But I think the European Union is aware that it needs to look beyond the transatlantic alliance now, and it needs to diversify and forge new relationships, be it in security, but particularly economically elsewhere. So it's realizing that it has been too dependent, for example, on China for critical minerals, on China for many of the imports that go into a lot of the production in Europe. So there has been an awakening, I think, over the last couple of years that the European Union needs to strengthen its industrial base, needs to pare back regulation, and needs to ensure that there's a working capital market and an investment climate so it can leverage its very rich single market.
- [17:34]
Interviewer
Last question I want to ask you. I'm curious about this idea of European self improvement and looking for silver linings here. Europe is often criticized for being too fractious. It has many member countries. We have trouble speaking as one. As you mentioned, different countries, different economies is a potential silver lining for Europe here, that European nations have come together as a result of this recent fracas.
- [17:55]
David Gura
In a way that has been previously.
- [17:57]
Interviewer
Very challenging for this bloc.
- [17:59]
Suzanne Lynch
I mean, it is the case that the European Union really only moves forward at a moment of crisis. So, for example, we saw that during the height of the eurozone crisis. We saw it then with Brexit when Britain decided to leave the European Union, a huge rupture for the bloc, that a member, and a big member at that, had decided to leave the EU and that's now 10 years ago almost rather than spawn copycat movements across the that actually, I think, served to galvanize the European Union and realize a kind of be careful what you wish for in some countries that yes, people might complain about the eu, but it's better to be in the bloc than outside it. So I think this shock, this rupture that's happening now between the United States and the European Union may actually serve to generate some much needed action in this area. And I think that's what you're going to see a lot of focus on in the next year or so in Brussels.
- [19:00]
David Gura
This is the Big Take from Bloomberg News. I'm David Gura. To get more from the Big Take and unlimited access to all of bloomberg.com, subscribe today@bloomberg.com podcastoffer if you like this episode, make sure to follow and review the Big Take. Wherever you listen to podcasts. It helps people find the show. Thanks for listening Listening. We'll be back tomorrow.
- [19:27]
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