A Transatlantic Economic Reset

Transatlantic headlines this spring have often been dominated by tariffs and confronting the destabilizing economic fallout of conflict in the Middle East. The noise detracts from the substance, and the diversion could lead to a costly miscalculation. 

The fixation on tariffs and trade skirmishes obscures a more consequential reality, one in which the EU-US relationship is being shaped by a rapidly deteriorating geopolitical environment that tests political trust and strategic coordination. It also overshadows the fact that the transatlantic relationship is not primarily a trade relationship but the world’s largest and most strategically significant investment partnership.

Consider what actually binds Washington and Brussels together. When Americans fill their carts at a Trader Joe's, Aldi, Giant, Stop & Shop, or Food Lion supermarket, they are interacting with European capital embedded in the US economy. When Europeans use Qualcomm chips in a Nokia device routed through Cisco infrastructure, they are drawing on transatlantic supply chains that took decades to build. EU companies employ 5.3 million American workers. Ties are dense, strategically consequential, and, critically, hard to replicate elsewhere. Their durability is not an argument for complacency. It is an argument for ambition.

This is because Washington and Brussels have been arguing over tariffs while Beijing has been focused on the longer game. China's 15th Five-Year Plan, released in March, referenced artificial intelligence (AI) over 50 times and introduced a sweeping "AI+ action plan" designed to embed the technology in every sector of the country’s economy. Beijing's bet is not on winning a singular frontier-model race. It is on diffusion at scale: affordable AI embedded in a vertical stack of cloud, 5G, embodied robotics, and state-backed industrial infrastructure. The country that deploys AI most broadly across its economy, not just most brilliantly in its labs, will generate the compounding productivity advantages that define geopolitical power in the decades ahead.

The transatlantic relationship has the assets to compete. What it lacks is coordination.

Three areas demand urgent joint action.

Critical Minerals 

China controls critical-mineral chokepoints that matter by accounting for roughly 70% of global processing capacity and more than 90% capacity for rare earths and battery‑grade graphite. In October 2025, Beijing tightened its grip further, expanding export controls on five rare earths critical to defense applications and electric vehicle motors. The US starting point for addressing this situation emphasizes domestic investment and negotiating bilateral deals, while acknowledging in a US Trade Representative proposal for a plurilateral agreement on critical minerals that there are limits to the impact of national strategies on global supply chains.

Fragmented, uncoordinated approaches cannot compete with Beijing's state-backed, vertically integrated model. The goal must be managed interdependence: diversifying sources, pooling demand, and sharing strategic dependencies among trusted partners. An EU-US memorandum of understanding on critical minerals, to go alongside the February 2026 US-EU-Japan action plans for coordinated supply floors, would be a move in the right direction. The test would be implementing it and seeing if democracies can avoid the coordination failures that have plagued previous attempts in sensitive, state-distorted sectors.

The Digital Stack

The global economy is reorganizing, rapidly, around two competing technology ecosystems: democratic and state-driven. Without deliberate transatlantic coordination, Europe risks being relegated to regulating both while shaping neither. From cloud infrastructure and data centers to semiconductors and AI systems, interoperability with trusted partners delivers more security than fragmented domestic solutions. The EU AI Act's high-risk rules come into full force in August while the US federal AI framework is still taking shape. Now, therefore, is precisely the time to pursue mutual recognition on AI safety standards. This need not mean identical regulations, but it will require a common framework that avoids a regulatory trade war and preserves a coherent democratic structure for technology. The alternative—parallel, incompatible tech stacks—raises costs, slows deployment, and cedes global standard-setting to Beijing.

Infrastructure

In a post-USAID landscape, development is no longer about discrete projects in emerging economies. It is about who builds the systems that deliver power, health care, connectivity, and governance, and who, therefore, shapes the terms of integration into the global economy. The EU and the United States have each committed significant resources to this effort. Germany's €500 billion infrastructure fund, the EU's Connecting Europe Facility, and the US’s Lobito Corridor initiative in Africa are three examples. But transatlantic investment in emerging markets remains strikingly fragmented, unable to aggregate demand or attract private capital at the scale required to compete with Chinese state financing. A joint infrastructure investment framework to align development finance institutions, export credit agencies, and public finance tools around shared strategic priorities would change that calculus. It is not about a spending spree but smarter coordination.

Better Together

None of this requires Washington and Brussels to agree on everything. They will not anyway. Trade tensions, digital regulation disputes, and strategic divergences on China policy will persist. But the transatlantic relationship has always been strongest when it builds together, whether that be shared institutions, infrastructure or standards. The Turnberry trade deal bought time. A reset of the economic and technology agenda would buy strategic advantage.

The question is not whether Europe and the United States can afford to coordinate. Given what China's 15th Five-Year Plan signals about the next five years, the issue is whether they can afford not to.

The views expressed herein are those solely of the author(s). GMF as an institution does not take positions.