European leaders rushed this week to come up with a new defense plan to protect Ukraine without U .S.
leadership. The split reverses decades of transatlantic cooperation, and interestingly, some markets are loving it.
U .S. stocks, not so much.
This is Swamp Notes, the weekly podcast from the FT News Briefing, where we talk about all the things happening in U .S.
politics. I'm Mark Filippino.
And this week we're asking, what are the costs of Trump's transatlantic divorce?
Here with me to discuss is a special guest.
He's the FT's chief foreign affairs commentator and the host of the Rockman Review podcast, Gideon Rockman.
Hey, Gideon. Hi. So I want to set the scene for this thing I've just called the transatlantic divorce.
The news of the past week has been largely defense related, but there are also the tariffs U .S.
President Donald Trump threatened Europe with.
He said that the European Union was made to, quote, screw the United States a little while ago.
Vice President J .D.
Vance has criticized Europe for walking away from its values.
What does this tell us about where things are headed between these two powers?
Yeah, I mean, I think it's pretty profound.
Of course, Trump's super unpredictable.
And, you know, he may say very nice things about Europe next week.
But the working assumption, I think in Europe now is that the transatlantic relationship is in deep trouble and that Europe really is on its own now on security, that NATO is still alive in theory.
But I don't think anybody really believes that America can always be relied upon to come to Europe's aid when it's in trouble militarily.
Trump's more or less said that on a few occasions.
And the implications of that, the Europeans have to do a lot more for their own defense.
And there are even sort of more serious implications.
And there's one way of thinking of it, which is, okay, America is no longer a reliable ally, and we have to defend ourselves.
And the Europeans are doing quite a lot to try and do that.
But then there's an even darker view, which is that in some respects, America is now an adversary.
It's not just not a reliable ally.
Drawn from things like Trump's evident warmness towards Putin, his aggression towards Zelensky, the fear that Trump is going to do a deal with Russia over the heads of the Europeans, the Vance speech in Munich, which you alluded to.
Vance said he was speaking up for free speech in Europe, but in Europe, it felt like he was speaking up for the European far right, who are regarded as a threat to democracy, and therefore, as a German politician said, criticized Europe for walking away from its values what does this tell us about where things are headed between these two powers um yeah i mean i think it's pretty profound um of course trump's super unpredictable and you know he may say very even though they have inferior forces in terms of manpower um is because they had very good intelligence provided to them by the americans
largely and the other reason was that they had a lot of American equipment, in particular artillery shells.
But also, the other thing they're very worried about not having now is air defences, because Russia's strategy has been to basically pummel Ukrainian infrastructure to try to destroy Ukrainians' energy resources, and also to put their cities under threat with patriot missiles supplied by the United States.
They were able to kind of, if not totally negate that threat, to blunt it to some extent.
The question is, can the Europeans fill the gap?
We don't quite no, but probably not completely.
One thing that America really does provide uniquely is air defenses, patriots.
The intelligence thing is a bit murkier.
Can the French or another step in the gap?
Maybe a bit. But yeah, it's dangerous for Ukraine.
What about the German aspect of this?
I mean, this week we saw Germany take a pretty unprecedented move, basically decided to approve hundreds of billions of euros to go toward defense spending.
There's talk of a Europe -wide stimulus package.
These are big fiscal moves that Europe has not seen in a very, very long time.
What does it mean for the bloc?
It means a lot. I mean, I think that, you know, Germany is the largest economy and the largest industrial base.
Their reluctance to spend and their kind of semi -pacifist attitude to the world, a result of the Second World War, meant that they were a kind of big drag on European defence efforts.
Now they've really done 180.
And that's huge in its implications because they're much less indebted than say the French.
The French have already have a public debt which is worth 100 % of GDP.
The British are also at that level.
Germans are only at about 60 % because they've been relatively frugal.
So they have the capacity to borrow.
The markets trust them.
And also it looks like they're going to put their weight behind European debt, which again, the Germans have been a big break on.
That has implications actually well beyond defense.
It's really one of the big next steps in European integration, which people have been arguing about for 20 plus years.
The difficulty is timing.
I mean, I think over time, Germany, backed by the rest of Europe, can become a considerable military force, but they've let their military really run down, certainly in the post -Cold War era.
And you can't sort of bring it into existence overnight.
So it's possibly a 10 -year project to really fill all the capabilities that America currently covers for them.
And the question is, does Europe have 10 years?
Gideon, what does this mean from an economics perspective?
Because the markets this week, we saw a very large bond sell -off, potentially indicating that investors are excited about the economic growth that will come with defense spending.
What did you make of that?
Yeah, I mean, I think that one of the interesting things that's been happening is the reversal of expectations.
You know, I was at the World Economic Forum in Davos in January, and everyone was saying, oh, God, you know, the actions all in America, no investor in their right mind would invest in Europe.
Look at the American stock market it's going to boom under trump whatever you think of him and you know on the contrary the american markets are struggling and european markets are booming um i guess you know just tells us again that obviously if markets were that predictable we'd all be very rich you know the point is you can't tell how these things are going to play out but what i think they're currently reacting to is the sense that um defense spending will provide a kind of keynesian stimulus to the German economy, which has been struggling, struggling partly because they are losing market
share in China for machine tools for the automobile industry.
And people thought, you know, what's the way out of this?
And in fact, a French industrialist joked to me a year ago, well, it's very clear, as he said, they can't sell their cars, they'll make tanks instead.
And he didn't say it with any great relish, you know, the French and others in Europe still have a kind of lingering suspicion of German rearmament.
But I think that's what's happening right now.
You can see the share price of Rheinmetall, which is the main German armaments manufacturer, really soaring.
So Gideon, a lot of what we've been talking about is Europe becoming self -sufficient and laying the groundwork to be independent of the US in many ways.
Is it possible that Europe walks away with this better than it was before Trump?
Well, that's the hope.
I don't know. I mean, I think that, you know, there is a sort of determination in Europe now to try and make this work.
And I think over the long run, possibly.
But, you know, Europe does have all sorts of vulnerabilities, as Trump doesn't hesitate to point out.
The Europeans enjoy a trade surplus with the United States.
So, in theory, if there's a trade war, this side of the Atlantic is more vulnerable.
You know, France, Britain are very indebted countries Italy, so on.
They don't have a reserve currency to back that up.
They also have welfare programs that are hugely expensive and becoming more expensive.
And they can talk a good game about spending more on defense, but how they fund it, you know, to some extent, issuing common European debt is a new source.
The other possible source is confiscating these 200 to 300 billion in Russian assets, maybe handing them over to Ukraine, or maybe using them for European defence, or a bit of both.
So there are some ways, but I think one of the things that European politicians are beginning to worry about is, let's say we cut welfare to fund defence.
Does that then fuel the rise of the political extremes that we're trying to stop?
So Europe does have real weaknesses, and I think Trump can play on those.
But I think that one of the things, and mood shifts very quickly.
But the sense of Trump's America that holds all the cards is diminishing a little bit because Trump's policy approach seems so chaotic, exemplified by, you know, tariffs on Canada one day, then off the next day, then on again the next week, and then off again.
And you suddenly realize these guys don't know what they're doing.
And maybe that actually gives Europe an advantage.
I think another thing people are beginning to talk about is if there is a threat to the rule of law in America might Europe be able to say, yeah, you know, we're slow moving and you know all our problems, but actually you'll still get a fair shake in the European courts.
The regulators are not necessarily going to be in the pocket of a very powerful businessman who's, you know, next door to the president.
So there may be something there for Europeans as well, depending on how badly things go in America.
Gideon, what are you watching next?
What about this transatlantic divorce are you curious about well i mean i think the the big thing immediate thing is ukraine uh does trump stike a deal with putin can the europeans get their seat at the table and does this whole process exacerbate the rift between the two sides of the atlantic or might um actually we end up in a place where both the u .s and europe can kind of live with it in which case maybe in a couple of months time will say, well, that was just sort of Trump theatrics and it was all pretty brutal and distasteful.
But in the end, Europe and America found common ground and Trump didn't basically kind of switch sides and join up with the Russians.
The more dangerous outcome is that actually what we're seeing is just a prelude to a real transatlantic rift over Ukraine.
I'm a bit of a worst case scenario person.
I think this transatlantic rift is real and probably quite historic until such time as America definitively turns away from Trumpism, by which time who knows where we'll be.
Gideon, I want to thank you for a great conversation.
My pleasure. Gideon Rockman is the FT's chief foreign affairs commentator and the host of the Rockman Review podcast.
We'll post a link to that in the show notes.
this was swamp notes the u .s politics show from the ft news briefing if you want to sign up for the swamp notes newsletter we've also got a link to that in the show notes our show is mixed by sam giovinko and produced by katia kumkova we had help this week from andrew georgiades and misha frankel duval special thanks as always to pierre nicholson i'm your host mark filipino our executive producer is Topher Forhez, and Cheryl Brumley is the FT's Global Head of Audio, original music by Hannes Brown.
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