The Trump administration, focused on the economic arms race with China and its foreign policy goals, doesn’t seem to be listening to Europe.
WASHINGTON — As European finance officials descended on the U.S. capital this week for the IMF-World Bank spring meetings, they sought to engage the Americans on the existential economic issues facing the continent: from the economic fallout from the Iran war to threats facing the global financial system to support for Ukraine.
Despite their best attempts, their messaging seems to be lost in translation as the U.S. focuses on an economic arms race with China and its foreign policy goals.
In dour briefing rooms, embassy terraces and swanky downtown restaurants, corporate executives, senior officials and top lobbyists from the U.S. and Europe painted a picture of the current state of the transatlantic relationship.
It’s one where European concerns — from the geopolitical threat from Russia, to energy supply shocks, to risks to their financial markets from nonbank lending in the U.S. — are seen as peripheral by the Americans.
“Europe sometimes gets lost with the two big guys,” Paul Gruenwald, global chief economist at S&P Global Ratings, told me, referring to the U.S. and China. When Europe is discussed in U.S. economic conversations, it’s often with a “slightly negative” leaning, while Russia is discussed in terms of its relevance to the global energy market, “not as a security issue,” he added over coffee in a sweltering downtown D.C.
Among attendees of the World Bank and International Monetary Fund meetings this week, there was a sense that the U.S. — riding high on the economic boost from its domestic AI industry and comparably insulated from the financial fallout of the Iran war because of its energy independence — can afford to be self-centered.
But Europe — struggling for growth, economically more exposed to the fallout of a war it didn’t start, and politically bearing the brunt of the Trump administration’s ire for not joining the military operations in Iran — has no choice but to look outwards.
Even on the public level, statements from each side of the Atlantic tell very different stories. The two major statements on the economic ramifications of the Iran war this week came from an ad-hoc group of finance ministers — not including the U.S. — and from the French finance ministry, which is chairing G7 talks.
Per the French, G7 ministers including the U.S. were “unanimous” on the need to limit the cost to the global economy of an enduring conflict. Per the Americans, Treasury Secretary Scott Bessent “underscored the U.S. Treasury’s commitment to Economic Fury” in meetings with his European counterparts.
Growing pains
At finance industry gatherings in D.C.’s office buildings and historic hotels, the EU’s efforts to boost growth and stimulate investment by removing fragmentation in European capital markets was seen by industry and regulators alike with either curiosity, because they don’t understand the project, or skepticism because they doubt the EU can get over its internal rivalries and integrate.
This week Bessent reiterated the U.S. mantra that “the biggest risk to financial stability is a lack of growth,” accusing the EU of being “unable to follow the Draghi Report … on how it would increase growth.” The existence of the bloc should “facilitate trade among the members, make it more seamless, create more prosperity, and it turns out it has probably been a hindrance,” he said.
The Europeans struck a more conciliatory tone. U.K. Finance Minister Rachel Reeves said Britain’s trade deal with the U.S. is “in both of our countries’ interests,” and said technical work with U.S. counterparts on the future of capital markets and financial services is moving forward. “That relationship and that work together continues,” she said.
EU Economy Commissioner Valdis Dombrovskis also played up the transatlantic ties. “In the face of common challenges, the U.S. and the EU are stronger together. While differences are clear, we have always managed to work through them and should continue to do so,” he told POLITICO.
But after weeks of downgrading growth forecasts, trying to shore up the continent’s energy security, and staving off the risks of superpowered AI to European banks, that diplomatic resolve may be starting to wear thin.
Although the EU is committed to “constructive relations” with the U.S., Dombrovskis said, “we will not turn a blind eye to any risks to our interests.”