Transition 2025 Series: The Future of Transatlantic Relations

Panelists discuss transatlantic ties under a second Trump administration, NATO burden-sharing, and the future of European strategic autonomy. 

This meeting is part of CFR’s Transition 2025 series, which examines the major foreign policy issues confronting the Trump administration.

MATTHIJS: All right. Good afternoon, everybody. Welcome to today’s Council on Foreign Relations Transition 2025 Series meeting on “The Future of Transatlantic Relations.” I am Matthias Matthijs. I’m a senior fellow for Europe here at the Council, and I will be presiding over today’s discussion. 

Note that this meeting, we could have it every Monday. We could have a standing Monday transatlantic lunch. But it’s part of CFR’s Transition 2025 Series, which examines the major foreign policy issues confronting the Trump-Vance administration.  

So we have an excellent panel, three here with us and one in Rome. So let me start with Nathalie Tocci, who’s the director at the Istituto Affari Internazionali in Rome in Italy. Also was a former special advisor to the EU High Representatives Federica Mogherini, as well as Josep Borrell. Nathalie, can you hear us?  

TOCCI: Absolutely. 

MATTHIJS: Perfect. Let me start with you. The latest from Washington, D.C., and I guess also from yesterday, Air Force One above the newly renamed Gulf of America was an announcement of new tariffs on aluminum and steel of 25 percent, global tariffs. So we’ve seen this before in 2018, but then, of course, it was 10 percent on aluminum. There’s also a sense, I think, among—both on Wall Street and in D.C., that Europe is next when it comes to Donald Trump’s focus on kind of restructuring U.S. economic relations with the world. So let’s start with this. How is the European Union preparing to respond to, I guess, the tariff challenge, but any challenges of the Trump administration? But starting now with this latest tariff on steel and aluminum? 

TOCCI: Great. Well, thank you so much. And it’s wonderful to be with CFR again.  

So let me make perhaps a few rather general remarks and then sort of weave in the tariff bit into them. So I think, you know, as Europeans think about the second Trump administration, there are some elements which, of course, resonate with the first, but on steroids, and some which are newer, or perhaps they’ve become far more apparent now than they were last time around. And I think all of them are relevant to the tariff story, but not just to the tariff story, but even to some of the security questions which I’m sure we’re going to get into.  

So obviously the first element, which is an old element, but I as I said coming, you know, back with a vengeance, is the transaction list. And, you know, what we see in this is the fact that Donald Trump is interested in having deals and essentially looks at tariffs as an instrument. We see this kind of, you know, willingness to look for deals even in other areas, right? I mean, probably the one that Doug is going to be talking about the most, which is on the security front, and especially as far as Ukraine is concerned. You know, so this sense of, you know, I want a deal. I’m not necessarily interested, actually, in the fine details of that deal, as long as there’s a deal, right?  

And that seems to be the kind of impression, as I said, on the economics front but not only on the economics front. And perhaps, as a little sort of footnote on the non-economics—i.e., especially on the security front—you know, I think this drive for a deal puts Europeans in a very difficult predicament almost regardless of what happens because you have one scenario in which, indeed, let’s say, a deal on Ukraine is actually reached, but—well, firstly, presumably it would be reached over the heads of Europeans, which, of course, kind of, you know, brings up all sorts of issues and problems.  

But also, it’s a deal that would actually be potentially very politically divisive in Europe, insofar as presumably there would be countries, particularly in North and Eastern Europe, that would see this, at most, as a pretty bad deal, and therefore one which would really require continuing to support Ukraine in terms of defense, in terms of a threat by force. I mean, I’m not going to get into this. As I said, Doug is going to get into it. But essentially, you know, a deal that, at most, is a very fragile one, and that therefore would require a sort of very committed European response, but it’s a situation which would actually be, I think, relatively divisive for Europe because there would be other countries that would be very willing to see this, as, you know, peace is made right?  

And therefore, the opportunity to back off in terms of support for Ukraine. And then you have, of course, the other scenario, in which there is no deal, which is probably even more plausible than the first. And under that scenario, there is also a sort of sub-scenario in which Trump actually kind of gets bored and starts looking for a Nobel Peace Prize elsewhere. So this is a scenario of an ongoing war with no deal onto the shoulders of Europeans.  

Anyway, onto the second aspect which is, again, old but, you know, on steroids. It’s, indeed, the protectionism. And here, as you said, you know, we know that now there are going to be tariffs on steel and aluminum. We don’t quite know exactly to what extent this is, in a sense, a subset of the broader tariffs that they will be on Europe. And I think we basically have two models here. I mean, considering the tariffs that have already been announced. On the one hand, in a sense, you have the China model. On the other hand, you have the Mexico and Canada model.  

And what do I mean by this? I think, as far as the U.S.-China dynamic—and, of course, we know that those 10 percent tariffs are already there—that seems to be part of, you know, tariffs intended as a negotiation tactic in the context of a negotiation which is, indeed, about trade. I mean, it may have other elements, but it’s indeed about trade. Then you have the other model, which is, in a sense, the Canada/Mexico model, in which tariffs are understood more as a coercion instrument. And I think the question the Europeans are grappling with is in which of these two models basically Europe is going to fall into when it comes to the tariff story. And I imagine that it’s going to be a kind of mix between the two, probably tilting more towards the coercion than towards the negotiation tactic. But, you know, we’re still obviously awaiting to see what will happen.  

Now, this leads me to the third element, which I think is newer. And it relates to the second and the first. Or, rather, it allows us to interpret in a different, far more dangerous way, the second and the first. And that’s, in a sense, Trump two, that, as opposed to Trump one, is far more imperial in nature, right? So, you know, whereas the transactionalism and the protectionism is a kind of old story on steroids, the imperialism kind of feels new, right? And what I mean by imperialism is essentially the idea of Trump thinking that spheres of influence are a good thing, very explicitly so in the case of Canada and Mexico and Panama and Greenland, of course—which gets us into Europe. 

But I would say, more broadly, probably the way he thinks about Europe in general, right? I’m not trying to suggest here that he kind of plans on kind of, you know, marching into to Europe, but I think, you know, he essentially understands—and probably both Trump and Musk—understand Europe as a land to be subjugated, essentially. And so, you know, both the transactionalism and the protectionism, in a sense, acquire a completely different meaning considering the imperialism, in a sense, that underpins the intention.  

And, of course, if you do have an imperial strategy, then what you try to do is divide the rule, right? And this is very much, I think, something that we’re going to see, particularly in the case of the tariffs that we were describing. So let us imagine—I mean, it’s very clear that if you try to subjugate Europe, well, it’s far easier to do so by engaging bilaterally with different member states rather than collectively with the European Union as a whole. And, of course, when it comes to trade, we know that there is—as opposed to, for instance, defense, there is, indeed, one who, called the European Union. And that’s where the competence lies.  

But I can imagine that what we’re very likely to see is Trump approaching some of his friends in Europe, beginning perhaps with my own country, where, you know, the relationship between Donald Trump and Giorgi Meloni seems to be a rather good one. And I can imagine a dynamic in which Trump will possibly suggest, you know, some sweet deals on trade. You know, let’s exempt parmesan, or Italian wine, or luxury goods, or whatnot. Now, in principle, of course, what the reply to that offer should be as thanks, but no thanks, right? Or, thanks, but please tell Ursula von der Leyen, because that’s really the address that we should be thinking about.  

But is that really going to be the kind of response that we’re going to get, insofar as, of course, there is an ideological—a growing ideological convergence between Trump and what he represents and a growing number of governments in Europe?  

And this gets—this gets me to the sort of final aspect, which is, again, a kind of newer element of the Trump administration, or one that has since emerged far more forcefully in Trump two compared to Trump one, which is the nationalism and authoritarianism. And I think this is a story which is relevant not only for the United States, but, of course, for Europe. Because whereas the first Trump administration arrived at a time in Europe in which nationalist populism was actually going down, it now hits Europe at a time, you know, in which that curve is on its—you know, it’s on its way up.  

And so it’s going to be far easier—you know, to the extent to which there are going to be—you know, now, if you actually count around the European Council, there are nine, perhaps, actually—no, now with Belgium, ten governments in which the far-right is in power, right? Either as the majority or the minority shareholder of a coalition government. And the list probably over the course of 2025 is going to grow. I mean, we can imagine that, say, the Czech Republic, Austria, and Romania, perhaps, are going to be added onto that list. So the cohort of governments in which there’s a convergence of views across the Atlantic actually increases. And, of course, these are governments that are not just right wing, but they are Eurosceptic, which makes that divide and rule tactic—both through—you know, as far as Trump is concerned, but also as far as security is concerned—far easier to implement. And I’ll stop there.  

MATTHIJS: Yeah. Thank you, Nathalie. The only thing I take issue with is that this new Belgian government has far-right elements to it. It’s very soft nationalist, by the way. But maybe we can talk more about this.  

But I want to turn to Douglas Lute. Ambassador Lute is the chair of the International and Defense Practices at the BGR group and CEO of Cambridge Global Advisors, as well as distinguished chair of social sciences at the U.S. Military Academy at West Point. Doug is the former U.S. ambassador to NATO during the second Obama administration, ’13-’17. And from ’07 to ’13 he served in the White House, coordinating the wars in Iraq and Afghanistan. So, Doug, no better person to ask this question to.  

So if we think about what’s probably the most important issue in transatlantic relations today, and I think with the Munich Security Conference coming up that will dominate the media this coming days and week, is Ukraine. You wrote a memo on Christmas Eve telling the forty-seventh president to give Ukraine what it needs to win. So what do you consider the prospects of this to actually happen? And, short of Ukraine, quote/unquote, “winning,” what do you think the terms of the much talked about ceasefire could look like? And can any such deal be an acceptable one to Ukraine or to Europe? In just a few minutes. (Laughter.) 

LUTE: OK, great. A few minutes. Well, first of all, this memo, which I wrote with CFR colleagues here just before Christmas, was really designed to be sort of a, OK, I’m going to say this one more time—(laughter)—to my friends in the Biden administration, right? That if they remove the qualitative and quantitative and geographic restrictions on military assistance to Ukraine, Ukraine could actually win this in almost anyone’s definition of winning. And I said this, as I lay out in this memo, that this is because of two enduring vulnerabilities—battlefield vulnerabilities of the Russian occupying force.  

First of all, vulnerability number one, it’s a low-quality army. This is an army that’s pressed into service. It’s poorly led. It’s almost untrained. This is an army of thugs and led by corrupt leadership all the way up to the Kremlin, right? And low-quality armies like that are vulnerable to cracking and fragmenting on sometimes very short notice. So that’s vulnerability number one. Vulnerability number two is the 500,000 Russians who are occupying Ukrainian sovereign territory are reliant on railroads as their supply—their supply lines. And this has always been—long been true for the Russian army. Has to do with the great distances inside Russia and so forth. But railroads are vulnerable, OK, to strike.  

And in particular here the iconic example is the Kerch Strait Bridge, which is the primary lifeline for the occupation of Crimea, right? Why the Kerch Strait Bridge still stands is beyond me, but you could be sure if the Ukrainians had the capability, they would have taken it down by now and isolated the Crimean Peninsula. And I think it points to the fact that we have limited both in scale and scope and application the long range strike system. 

(Phone rings.) Sorry, my daughter is probably calling me. (Laughter.) 

The U.S. assistance under the Biden administration. And the shorthand for that campaign of military assistance is too little too late, or enough for Ukraine not to lose but not enough for Ukraine to win.  

So that was kind of clearing my throat at the end of the Biden administration. (Laughter.) Sorry. This is what happens when you’re in semi-retirement stage. But it’s an interesting message to the Trump administration, who will now be in the position of trying to assemble, accumulate leverage, on both parties—both of the two warring parties, right? So you can imagine an element of leverage on Putin that says something like, look, we know now you’re under pressure by the indigenous Ukrainian campaign on long range strikes, with Ukrainian drones and so forth. I think they’ve hit recently ten of the top twelve oil refineries inside Russia. Imagine if that were worsened for Russia by way of our taking off the restrictions on long range precision strike systems. And we could do this, right? So at any rate, that’s the clearing of the throat.  

You asked me about ceasefire. Look, first and foremost, there is no plan, OK? So, I mean, it’s not as though we’re trying to decipher the plan, or the plan hasn’t leaked yet, or at Munich in a couple days somebody’s going to get at the podium and announce the plan. There is no plan, OK? So everybody just needs to be patient, OK? There is no strategy here that leads to what Trump promised in his campaign. And Keith Kellogg, an old Army colleague, is going essentially with an empty—an empty suitcase, right? And he’s going to try to accumulate leverage on both sides of the conflict.  

Now, while there may be no plan in the White House today, I think we can outline some cornerstones of what an effective ceasefire might mean. What are some of the elements of a viable ceasefire? I’d list three. First of all, it seems to me it has to be mutually accepted, not imposed on the parties, right? It has to be agreeable by the two parties. Why? Because we’re not going, and no one else—to include the Europeans—is going to go there and enforce it, right? It has to be something where both parties see it in their interest to stop fighting. And that involves, I think, accumulating leverage on both parties and a series of threats—you know, if this, then that, and so forth.  

But a ceasefire that is seemingly imposed from over the horizon or from afar will not take. We essentially tried that with Minsk I and Minsk II, years ago, right? And there was—you know, OSCE could watch the violations, they could count the violations, but they couldn’t do anything about it, right? So I think that’s telling. And I would put cornerstone number one, mutually acceptable, mutually agreed—even if the agreement is somewhat imposed by way of leverage.  

Number two, it needs to be verifiable. Because you can imagine any ceasefire in Ukraine along the line of contact, there are going to be claims of violations by both sides. Some of—and there will be deliberate violations on both sides, which then get false flagged to the other side, right? So this is going to be very confusing. The good news is today you can do a lot of this remotely from the air with drones, and electronic sensors, and so forth. But it needs to have an element of being verifiable.  

And the third cornerstone I think is that a ceasefire should be seen as only the initial step in a longer process, right? So remember the ceasefire in Gaza had phase one, then it had a—it had step-by-step milestones, X number of hostages, X number of releases, and so forth. And then there’s to be a phase two. And so that’s the sort of design that a ceasefire in Ukraine will need. It’ll need a sort of step-by-step logical process, with phases, and milestones, and so forth, right? And the idea here is that with performance, with delivery of some of these early milestones and phases, you can imagine the process can go from ceasefire to something more durable and comprehensive.  

But, look, all this just suggests how difficult this is going to be, I haven’t talked about the tough issues—the status of occupied territories, the security guarantees that Ukraine, as the weaker of the two parties, will require, reparations for damages to civilian infrastructure, the return—the return of forcibly displaced Ukrainians, persons, right? War crimes. What happens when one of the two parties is led by an indicted war criminal? What about sanctions on Russia and the 300 billion (dollars) of frozen central bank assets? So I haven’t even talked about that, right? We’re just talking about the first step.  

So I think for now what we can expect coming out of Munich, if we get anything out of Munich this week—and, by the way, the first defense ministers meeting at NATO are Wednesday and Thursday of this week, so you’ll see SecDef Hegseth in his sort of international setting at Brussels, before then proceeding to Munich. But when the vice president, the secretary of state, and the secretary of defense go to Munich I think what we can see—what we’ll see is an attempt to begin to assemble packages of leverage on the two parties, right, which just begin to suggest where the administration is going.  

But let me just conclude by where I started. There is today no strategy, right? So it’s not that we don’t know. We do know. There is no strategy. Like so many things that are being ruled out by this administration—whether it’s the disassembly of USAID or whatever, right—they’re just kind of play in it day to day. And I think that’s what we’re going to see at Munich. 

MATTHIJS: Great. Thank you, Doug. That was excellent.  

Liana, let me turn to you next. So Liana is my colleague at CFR, fellow for Europe here, and well known to all of you. Liana, can you tell us a little bit—another big thing happening in Europe in the next few weeks is, of course, elections in Germany, right? And everybody’s watching very closely what that means for European policy and maybe also European unity when it comes to dealing with the Trump administration. 

FIX: Yeah, absolutely. Thank you, Matthias.  

Perhaps the best place to be right now in this new cycle that we have from the White House is actually be in the middle of the German election campaign, because you wouldn’t know. (Laughter.) You would discuss your economy, you would discuss migration, topics of German defense spending, how to deal with the United States, how to take responsibility for Ukraine without the United States possibly, are not featuring in the German election campaign. Instead you see a debate whether the conservatives, the successor, and also once archenemy of Angela Merkel, Friedrich Merz, is opening up to the Alternative for Germany, to the right wing, or not. So that’s what Germany is focusing on right now.  

But I do think there’s some optimism on the horizon. And that optimism comes from the lead candidate that we see right now, Friedrich Merz, whom I already mentioned, who to many in my peer group in Germany argue that his foreign policy positions seem to be, like, out of the ’80s, right? It’s somewhat, like, oh, this is old-fashioned what he talks about—deterrence, and defense, and Russia, and so on. I’m just thinking, well, perhaps it’s time for Germany to go back to the ’80s, to Cold War defense and deterrence spending. And that is one of the reasons why I do think that Germany can actually be back on the international stage. There’s not a lot of expectation. There’s a lot of concern about Germany as the sick man of Europe economically right now.  

But Germany has a good base, both economically—Germany has low debt, which gives it a lot of fiscal flexibility to address domestic demand, European demand, once Germany’s debt brake and European debt brake limits have flexible-ized. Germany has a lot of money that it can invest in defense, into 2 percent and beyond 2 percent. As I’ve said, Friedrich Merz has a clear outline of Germany’s foreign and security policy, in a conservative—one could perhaps, in the German context, say almost hawkish position. He is a strong supporter of Ukraine. He has suggested that Vladimir Putin should stop bombing civilian centers in Ukraine, otherwise Germany would deliver the long range strike Taurus missile to Ukraine.  

So that’s a position the United States and other European allies can work with. So there is a chance that Germany will be back on the European and on the international stage after the elections. Depends on the coalition options that Friedrich Merz will have after the elections, but it doesn’t look so bad. What will be the first challenge for the Europeans and for the Germans there? And there, going back to the Munich Security Conference, I do expect at the Munich Security Conference there will be a very clear message to Europeans, as has been quoted by—Mike Waltz has been quoted in the Guardian—to own the Ukraine conflict, and to take care of those security guarantees.  

And I don’t think that this administration will backtrack from that, right? So it does seem that there is a little bit of an idea of a division of labor emerging, which is we take care of the ceasefire. As Doug has said, we stop the fighting. We bring both parties to stop the fighting. But how to make sure that the fighting does not erupt again in the future, the security guarantees, that is going to be Europe’s problem. And so far, Europe and Germany have just focused on how do we keep the United States in, how do we keep U.S. weapons support continuing to Ukraine? They are very cautious on a European mission in Ukraine. And the main question for Europeans is, how will the United States protect us if anything happens to us in Ukraine? And the United States says, well, that’s the point of you owning—of you owning the conflict.  

So I expect this is going to be a big debate at the Munich Security Conference and after. It’s a debate that Friedrich Merz will have to face. And it will be his first test whether he actually wants to save the so-called Zeitenwende, the Germany’s changing of times, and actually take on a stronger leading security and defense role for Germany, alongside France, the U.K., and Poland. And the second challenge that I do see, especially after the Munich Security Conference where we will see a lot of news and reporting and criticism of Europeans, is that European should not lose sight of what is the actual problem. Like Nathalie pointed to that, that there are concerns about imperial undertones in Trump’s speech, and so on.  

But from a European perspective, focusing solely on Trump and what he does is not enough. Russia remains the one country that actually is subjugating Europe, right, and very violently. (Laughs.) And it is supported by China in this campaign. China continues to support Russia to enable it to follow through with this war, whereas Europeans at the moment are flirting with the idea that they can use China to hedge against Donald Trump and the United States. And that is something where I think Germany can—Friedrich Merz can hopefully provide leadership, to make clear that while the relationship with the United States will be challenging, and at times adversarial with Donald Trump, the real adversaries are Russia and China. And the European should not lose sight of that.  

MATTHIJS: Excellent. Thanks, Liana.  

And now I want to turn last, certainly not least, to Catherine Sendak, who’s currently director for transatlantic defense and security at CPA, the Center for European Policy Analysis, up Pennsylvania a bit, and former principal director for Russia, Ukraine, and Eurasia at the Office of the Under Secretary of Defense for Policy from 2018 to 2021. So, Catherine, if I can—if Liana allows me to paraphrase her redefinition of NATO as keeping the Americans in, the Russians out, and the Germans up, or something like that? (Laughter.) Would you agree with this? So what do you see as the future of NATO with this new administration? Because it is, I think, going to be a burning question in Munich as well. 

SENDAK: Yeah. No, absolutely. So thank you so much for having me this afternoon. What an honor it is to be on this panel with all of these panelists.  

You know, it’s a really interesting question. And I’ve appreciated everybody’s comments up to this point because, you know, we’ve now all mentioned Munich coming up. But this is going to be really the first foray of the new administration weighing in on European security and foreign policy issues. You know, it’s been a busy three weeks for the new administration, but they haven’t said a whole, whole lot about the construct of how they want to pursue this. We’ve heard a lot about defense spending, defense investment, everyone paying their share, et cetera.  

But the example that I’ve been using over the past year actually started happening at last year’s Munich Security Conference, which I attended. Which is I had a lot of sidebar conversations with a lot of our European partners really handwringing about what’s going to happen if Donald Trump is reelected. And the conversation, to Liana’s point, really centered around, what are we going to do if that happened? And, you know, the phrase that I came up with to kind of tackle that argument was, look, we’re not talking about four years of investment or four years of challenges. We’re really looking at a generational investment and issue in Europe and European security. 

We have learned so many lessons from Russia’s full-scale invasion in Ukraine about our own capabilities and our own capacity here in the West. And there’s a lot of work to do. And so no matter what happens over the next four years, and the challenges that that relationship is going to have—both bilaterally, multilaterally, and through, you know, organizations like NATO—everyone who recognizes that Russia is the adversary and that China is the adversary, and, you know, they have their—you know, I’m not going to say I own it, the axis of upheaval, whoever quoted that, has to keep their eye on the ball, exactly to Liana’s point.  

And it got mixed reactions over the past year, because we really are talking about doing some very, very difficult things, and a lot of difficult investment, and a lot of difficult leadership and decision making. I think from NATO’s perspective it’s going to be very, very important for the secretary general and the organization as a whole to be proactive versus reactive. This is something that we have struggled with since Russia’s full-scale invasion in Ukraine. You know, to Doug’s earlier point, what could we have gotten ahead of as the—as the conflict unfolded? What could we have gotten ahead of in our own foreign policy, our own investments, our own defense spending to actually recognize and identify the gaps that we need to fill much faster than three years?  

And it has been reactive in many, many ways. And so it is time to gain that leverage. You know, I would argue the time is absolutely now. If it was not before, it is now, to gain the leverage. Before any negotiation, any discussion, you have to go to the table with the strongest possible perspective and the strongest amount of leverage. And that is done through a variety of tactics. I think NATO can do a lot to lean forward in terms of capability investment, really shoring up these regional defense plans and capability targets, really understanding what it’s going to cost—not just in capitals, but as part of the alliance that you have to do.  

Now, I think there’s going to be a lot of sound, don’t get me wrong. There’s going to be a lot of talk about 5 percent defense spending, and you’re owning this, Europe. The U.S. is not owning this problem set. And I want that to be noise because what I really want to see is the action unfolding. I really want to see the stockpiles. I really want to see the munitions investments. I really want to see capability platform investments. I want to understand dual use and how it’s going to be used throughout the alliance. And how we’re going to actually execute regional defense plans with the amount of people we need to do so. Those are, quite frankly, unsexy things, but tremendously important to the organization moving forward, as we talked about last year, the next seventy-five years of NATO, which I think is extraordinarily important to recognize.  

The other thing I’ve been telling European partners is, please don’t ignore the vital role that the U.S. Congress plays in all of this. Please don’t let the administration suck up all of the air and the noise in the room to not understand that the check stops with the U.S. Congress, the authorities for how we train and equip Ukraine stops with the U.S. Congress. And, you know, we’ll see what, you know, unfolds in the coming weeks. And hopefully members of Congress will understand their role in the constitutionality of, you know, checks and balances, appropriations, et cetera. But there’s a really big conversation to have with that body about how they see and how they see foreign policy moving forward. And it’s something that usually gets lost in translation sometimes with European and other international partners. And I’ll leave it there.  

MATTHIJS: Thank you, Catherine. I don’t have time to follow up with all of you, and I want to, but I did want to follow up with Nathalie, because—it’s not quite dinner time here in Italy. It’s only like 7:00. (Laughter.) But one thing, Nathalie, maybe, for our audience in D.C. you could explain. And that is what’s known in Brussels, at least, as Europe’s big bazooka, meaning the anti-coercion instrument.  

Although I think Alan Beattie in the Financial Times described it better where he said: Just imagine watching a James Bond movie, but the first hour is spent on James Bond negotiating with M on the terms of the assignment, and then he has to go to Q to get all his gadgets, and he’s flirting with Moneypenny in the meantime, and so that takes an hour before you get to the action. So he was trying to explain that the anti-coercion instrument is real, and it is a geoeconomic tool the Europeans now have, but that it’s not something you can trigger and will go into effect overnight. So are we going to hear a lot more about this, Nathalie? And will the Europeans—are the Europeans willing to use it, in this case, against the United States? 

TOCCI: And, of course, Matthias, it was conceived initially not thinking about the United States at all. I mean, it was conceived thinking about China. And I think it was conceived in a context in which the European Union has really been changing its DNA, right? It was born and it grew up in a world of, you know, free trade, and openness, and all good things. And all of a sudden you kind of realize, oh, hey, you know, the world is changing, and therefore I’ve got to toughen up. And of course, economically speaking, that awakening really had to do a lot with removing our rose-tinted lenses as far as China was concerned.  

And you basically saw, over the course of the last five years, a number of trade and investment defense instruments, of which the anti-coercion instrument is one, being developed, with the ambition that it wouldn’t even stop there, right? I mean, with the ambition that actually over the course of the next five years it would not just be, you know, trade and investment defense, you know, from the anti-coercion instrument to investment screening, but it would actually move on to offense, right, both on the trade and the investment side. But, as I said, all this was conceived thinking about China.  

And all of a sudden it is not just China, right? I mean, this whole question comes back to the agenda, you know, lo and behold, thinking about the United States. And I don’t know, Matthias, if actually this is going to happen, partly for a reason that I think Liana was alluding to—i.e., the fact that, you know—(inaudible)—Europeans actually a little bit in a—yeah, I mean, a little bit as a crossroad, because on the one hand they—indeed, I think they think, well, we can’t really afford to engage in a two-front trade war both with the United States and with China. And yet, at the same time, partly because they’re no longer starry-eyed as far as China’s concerned, and also because they look at the China angle as one of the elements to, in a sense, play with in order to curry favor with the Trump administration.  

So you have these kind of two forces pushing in opposite directions. So I think it is—well, on the one hand, if we think about the anti-coercion instrument as far as the U.S. is concerned, I would be extremely surprised if actually this is used. I imagine that it is something that is put on the table because, of course, what the hope is, as far as the U.S. is concerned, is that this is part of a negotiation, right? And so you kind of want to show that you’ve got these instruments. You don’t necessarily want to use them. And you kind of hope that, in a sense, Trump’s going to do the same. But of course, as we know, in this kind—you know, in a dynamic of a trade war one thing is what you start off with, thinking and hoping, and quite enough and how the dynamic actually evolves.  

So, but I think, you know, as of today if I were to say, is the anti-coercion instrument going to be used vis-à-vis the United States, I would be still quite surprised if it is. I would be far less surprised if it’s actually used vis-à-vis China. But, again, as I said, I think that, as far as China’s concerned, you could really see things moving in two very different directions. On the one, the direction Liana was pointing to. But also there’s, I think, going to be a very strong push in the opposite direction, saying, hey, we can’t really afford a two-front trade war, both with the U.S. and China at the same time. 

MATTHIJS: Wow. OK. At this time I would like to invite our members, CFR members and guests, to join the conversation with their questions. Also, a reminder that this meeting is on the record. And if we have questions online, you’ll let me know, right? Yes, please, in the front. We have a microphone coming your way. Thank you. 

Q: Hi. I’m Bennett Freeman, Chatham House, former State Department.  

My question really goes to, to what extent can we compartmentalize the severe security and trade challenges that are already apparent, that may well divide the U.S. from our European trading and security partners? So if these tariffs turn out to be really materially damaging, to what extent is that going to affect our relationships with our NATO allies, both with respect to Ukraine, but more fundamentally? And what might be the response of the EU? I remember, you know, back in the Clinton years we used to talk about separate but not separate—separable but not separate EU-NATO interoperability and cooperation. And is there a potential for a truly independent, or at least more detachable, European defense capability, that we’ve talked about in theory for three decades, but in reality has never really happened? How do we balance these tensions and risks? To what extent they might be compartmentalized or not?  

MATTHIJS: That’s an excellent question. I always avoided European defense because it was boring when I was a grad student. (Laughter.) And it isn’t anymore. Liana, you want to tackle this? 

FIX: Yeah. I can—I can take a stab at it. 

I think compartmentalization is completely over. I think we are in a phase—and Nathalie said this is a transactional phase—where everything is tied to everything. So I will totally see that there’s a big basket of tariffs, Ukraine, security and defense, 5 percent, that is already now part of the negotiation that is taking place across the Atlantic, right? So I don’t see any compartmentalization still being existent anymore, which is, by the way, a huge challenge for Europeans because they have built the institutions in an entirely compartmentalized way. So you have NATO for security, EU commissioner for trade, you have the member states. So a colleague and I once proposed an E-7 format across institutions to actually deal with this way of linking everything to everything, and not being able to divide it into little subcommittees and so on.  

But my point why I do think that Europeans will never come to the point where they can allow themselves to look at Donald Trump in the same way they look at Vladimir Putin and Xi Jinping is not only because—(laughs)—the actions obviously are different there, but also because the dependence on the United States in defense is just so fundamental. There’s just no way that Europeans can afford that, right? And so that will always be the backdrop. Even if Europeans wanted to take a tough stance on Donald Trump, on tariffs and so on, the security part will always be the backstop in the relationship that will constrain Europeans on the one hand, but hopefully also prevent the relationship just completely blowing up or breaking apart.  

What Europeans could do, if they wanted to—and I’m not sure they really want to, and we have consensus if we want to fully move away from the United States—is to build up European defense in a way which could go both ways. If the U.S. comes back as unconditional NATO security provider, the European pillar within NATO. If the United States doesn’t come back, a more independent European defense for us. But whether that is operationally actually possible, to invest in something that could serve both purpose at the same time, Nathalie is much better equipped to judge that, but that could be a way out to say, well, we build something up that can serve both purposes, and we’ll see where we stand in five years’ time.  

MATTHIJS: Hmm. Doug. 

LUTE: So I think it’ll take twenty or thirty years’ time. (Laughter.) And the reason I say that is that the base is so prejudiced, so biased towards Europeans’ reliance on American systems that there’s no viable European defense industrial base to replace us. Look, under Zeitenwende, right, so, Scholz announces Zeitenwende. He gets 100 billion euros of, you know, cash, right? What are the first two systems he buys, he commits to with Zeitenwende? The F-35, OK, and the Chinook helicopter. Why? Because there aren’t viable European alternatives.  

So the defense industrial base for the free world is here. And, by the way, it has problems. I mean, we have problems here, OK, as the Ukraine war has revealed. But we’re at least twenty or thirty years in front of where the European defense industrial base is. And so because of that, there’s no real option. But this is fundamentally why the Europeans are so troubled by this, because they look around and they understand they can’t replace us in anything like a viable timeframe. And so tariffs, security—you know, doubts on security, even the way we treat our allies publicly, are all reminders of this inherent European vulnerability that is not easily escaped.  

MATTHIJS: More questions? Oh, Nathalie. 

TOCCI: Yeah. Can I just add very—I mean, I totally agree with Liana and Doug there. Can I just add a couple of points on the non-compartmentalization, to add an angle to this? And one has to do with capacity and one—and the other has to do with willingness. And I think there’s a capacity question here. To the extent that tariffs, i.e., translates into a trade war, i.e., translates into a major economic downturn in Europe, there’s not—I mean, there’s interlinkage between the security and the economics because that is obviously going to reduce the capacity for Europeans to do all good things, including, you know, buying more American weapons. So, I mean, there’s an element of the interlinkage there that I think is important to bear in mind.  

But there’s also another element of the interlinkage which has to do with this idea of tariffs, understood as an instrument of coercion. Let us say, for the sake of argument but perhaps not for the sake of argument, that Trump is going to really pinpoint Denmark with his tariffs, and obviously aimed at coercion with respect to Greenland. So here is basically a question in which it is the security—not Ukraine related, not Russia related, but it’s very much related to, you know, sovereignty and territorial integrity of an EU member state and NATO ally.  

Well, if tariffs are used as an instrument of coercion, how does that mean—you know, provided that what Doug and Liana were saying is absolutely correct—yeah, so there’s obviously kind of limits there—but how does the thinking basically in Europe change? Because I think this is a completely different discussion from the it would be nice to be strategically autonomous, but, oh, we can’t really do it, yeah? I mean, all of a sudden—(laughs)—there is a direct threat to the security coming, you know, from the United States itself.  

MATTHIJS: Excellent. More questions? Yes, please. 

Q: Hi. I’m Kevin Sheehan with Multiplier Capital, a private equity fund. Former Army officer and also former assistant professor of social sciences at West Point.  

I’d like to go back to Doug’s comment with regard to the developing of a European industrial base. About a year ago the EU announced a new industrial strategy which would put their defense industry on a wartime footing. Obviously it’s only been a year, but are there areas that Europe could develop short of twenty to thirty years where they could be added into the West defense, defense production in particular, where you could see progress in, call it, two to five years? Or is it twenty years across the board?  

MATTHIJS: What do you think? (Laughter.) 

SENDAK: Well, you know, please—I’ll defer to Doug on his thoughts on this. I was thinking this on the previous question as well. You know, the EU, if we talk about EU investment, right, and how they as a body are going to move this forward, you know, obviously they have a new commissioner for defense and space. They are trying to tackle this head on with a long white paper, which I’ve had the opportunity to speak with some of their team about. And they are covering the sun, moon, and stars in this white paper, so. (Laughs.) You know, as they look at how to address this issue, what I see from the EU constantly is there’s so much opportunity, there’s so much potential for them to really play a key role in the development of a sustainable industrial base on certain platforms and certain things.  

How they formulate that into something sustainable, something cohesive, and something collaborative is yet to be determined. You know, I think it’s going to be very difficult to get all those member states where they want to be on this. Much like data, you know, the watering down of things as decision making goes on. But I do see some opportunities in Europe and the European market. They need to seize those opportunities. Some of the same debate we’re having in the U.S. about, you know, what I mentioned before—dual-use platforms, or small drones, or small unmanned systems, or, you know, sensors, or EW—things like that, where the technology has evolved—is at such a changing pace that there’s opportunity to come in at a low level on some of this stuff and really expand.  

And that one small anecdote I will give you is last week I had the opportunity to sit down with a group of C-suite executives from Ukrainian technology companies. Many of them weren’t in the defense sector, necessarily, but many of them were. And a gentleman, I don’t think—you know, I won’t reveal—you know, Chatham House. But he said, you know, I run a small drone company, and we make about 75,000 drones a year. And that’s small for Ukraine. And my jaw dropped because—(laughs)—that’s big. That’s a big number in many other places. So I think—that’s all to say that there’s tons of opportunity. It’s how we channel that consistently, which over the past three years I’ve seen done not so well at this point.  

MATTHIJS: Doug or Liana. 

LUTE: Well, I think there are things like the small garage vintage drone operations that are possible. Look, Ukraine made a million—produced a million drones last year. A million, OK? And I don’t know the exact numbers from our Department of Defense, you know, across the river, but it’s probably like 5,000 or something like that, right? So this is a tremendous capability that could be transported to small businesses across Europe, I think, in a viable way. I think there’s some sort of Cold War vintage defense industrial base lines that could be transitioned. I mean, 155-millimeter artillery rounds are not that complicated to build, right?  

The thing I’d like to see the EU and NATO together do more on is protection against foreign influence in dual purpose infrastructure. So civil-military infrastructure. And here you see this pattern of, especially, Chinese investment in European transportation networks. They own the Greek Port of Piraeus, for example, deep-sea port, energy infrastructure, mass communications. Remember not too long ago the big 5G drama about who’s going to own the hardware for 5G in Europe, and trying to buy and ensure that China doesn’t infiltrate these dual-purpose systems.  

And they’re very important—it’s important to remember that they’re not just civilian systems. These are the railroads, the mass communication systems, the ports that Europe’s defense rests on as well, right? So I think there’s much more we could do in that arena which would actually, I think, play pretty well with this administration, right, for NATO and the EU to be more transparent about where these Chinese—mostly Chinese investments are, and what our European allies are doing to protect their own infrastructure. And, by the way, we have some work to do with that here at home too, right? There’s some Chinese attempts to buy up infrastructure here in the U.S. 

MATTHIJS: Liana, briefly. 

FIX: Just very quickly. In 2019 IISS published actually a very good study that I that I recommend, where they actually went through the figures. And their conclusion was, with a serious increase in defense spending, within a decade, Europeans would be able to do a medium-sized mission, for example, in the Western Balkans on their own. So that’s a decade. You can go through the figures again and try to play them, OK, what about if we have 3 percent defense spending, 4 percent, 5 percent? But the crucial thing in each scenario would be the strategic enablers that are provided by the United States, and how quickly can Europeans sort of fill that. So I think there is some room for more people to bring these sort of years down, but that would need a massive investment that you would need to explain towards the European taxpayers, with either threat perception or with we pull out the credit card, right? And Europe hasn’t done that yet, right? I mean, European joint debt is not there yet. And this is something, perhaps the biggest precondition for bringing down the timeline on European— 

LUTE: In fact, I’d argue if anybody’s made progress on this—you know, sometimes—I was in the chair at NATO in 2014 when the famous 2 percent pledge was signed for the first time at the head of state and government level. So Obama was in the chair for us, right? And sometimes I take the question, well, who’s most responsible for now ten consecutive years of real growth in European defense spending, since 2014, right? So pretty impressive. Ten consecutive years. Was it Obama, who was in the chair at the time the pledge was signed? Or was it Trump, who came—who followed, and, you know, yelled at allies and did the blame and shame public game, and so forth? Who’s most responsible?  

And they got it wrong. It’s Putin, OK. The president who should—who should be applauded for increases in European defense spending is Putin. And if he continues this path, and resists a ceasefire, followed by a plan to end the war in Ukraine, you know, that may actually help European defense spending. 

MATTHIJS: Yeah. And, of course, for NATO expansion as well. We have a question from the ether, I think. 

OPERATOR: We’ll take our next question from Cynthia Roberts. 

Q: Thank you. I want to take another bite at this defense industrial apple. And I want to direct it towards specifically Liana.  

If I heard correctly, you said—you were talking about in the German election it’s like the 1980s. And I had to pinch myself. I thought, that’s great. In the 1980s the Bundeswehr had twelve divisions, 1,000 aircraft, thirty-six brigades, you know, so on and so forth. So when you refer to the 1980s, are you suggesting that this is a recognition that not only Germany has the fiscal space, but that Germany has to be the leader in defense industrial? And they could do it. It’s as if Europeans, starting with the Germans, act as if this is a soft budget constraint. But it isn’t. Europeans and Germans need to recognize this is a hard budget constraint. The U.S. is not going to do this anymore, and the Europeans need to act as if this was the creation of the euro. And you should have created defense before you did the euro. That was your mistake. (Laughter.)  

So is it possible that this election could have more meaning in terms of recognition of what needs to happen going forward? I mean, frankly, we can cite ISS papers. We can—I’ve been looking at this since I started teaching European security in 1990s. And it’s a fairytale. But it doesn’t need to be. And so if Germany leads, then it will happen much faster, with, right, European defense industry, and much less—except for the enablers, I agree with that—U.S. support. And eventually Europe will do it all, and we’ll work in partnership. But is there a mindset of this recognition, you think, in this election? Will it finally be that kind of Zeitenwende? 

FIX: Yeah. So there’s a perception of Friedrich Merz that he seems to come out of the ’80s. He will not continue the term Zeitenwende, right? I mean, that’s an Olaf Scholz thing. But what he outlines for Germany and Germany’s role, and just recently in a foreign policy speech he said Germany should develop from a sleeping middle power to a leading middle power, that’s pointing to the direction that what has been started after Russia’s invasion of Ukraine will continue. Now, the crucial point here is Friedrich Merz comes from a conservative and fiscally conservative party that has always opposed any changes to the debt brake, that was actually introduced in the current coalition, the debt brake, in 2009. So that is sort of the debt brake that limits Germany to do more of its—to use more of its—increased defense spending through debt, and so on.  

And so far Friedrich Merz has not yet committed to seeing this debt brake more flexible. He has committed to 2 percent but he is not committed to anything beyond, whereas other politicians have been more open have said, well, we can talk about 3 percent or 3.5 percent. I’m still optimistic, because I do think he just can’t commit to it in the election campaign because he’s the leader of the conservative party, who was always, under Angela Merkel, concerned about joint debt, you know, benefiting the Greeks, and so on and so on. You know, all these debates in the European Union.  

But there will be no alternative to the conservatives, for example, in another grand coalition with the Social Democrats, looking at exemptions to the debt brake, because otherwise, the pain that they will have to force their taxpayers to take will be—will be too much. Defense spending in Germany’s GDP, increasing that just costs too much to do it significantly without debt. And there’s just no scenario how a leader, a Chancellor Friedrich Merz, can show up in the Hague at the next NATO summit without a pledge to increase defense spending beyond 2 percent. So I think this will be a discussion we will see, the defense spending after the election is over. And I hope I’m not too optimistic on that, but I do think Friedrich Merz will continue that path. 

MATTHIJS: I was struck, Cynthia, by your comparison with the founding of the euro. In the late ’80s, of course, it was the Germans who very much did not want the euro and the French that pushed them into it. And then, of course, the acceleration that came with the end of the Berlin Wall and German reunification. But I think that’s one thing. Every time I’m in security meetings I feel they should start inviting finance ministers to the—(laughter)—Munich Security Conference because people are talking about 3, 4, and 5 percent. I mean, if anyone has seen to any country that’s increased defense spending significantly, it’s hugely painful. And it’s been hugely slow, because what they’re still not willing to talk about in Europe is tradeoffs, right, is that what are you giving up. 

You’re either going to borrow more money, which there are huge constraints, for most countries maybe not Germany. But I would agree with Liana that he is trying to get the votes of the FDP right now, who’s struggling. He’s given up on tactical voting that they will be in a coalition, so now he wants all their votes. And the only way to get those is to not talk about the debt brake. But once the election is over, and they sit down, and all the things they want to do, they are going to have to talk about it. And I think they will even do it. That said, what I think will be a bridge too far is probably the credit card option that you mentioned, Liana. And that’s joint European debt.  

We have time for one last question, please. 

Q: Hi. Thank you very much. My name is—my name is James Siebens. (Coughs.) Excuse me. I’m with the Stimson Center.  

I wanted to ask about threat perception. This is something that has come up in the panel discussion. It strikes me that Ukraine did not have a million people mobilized just two years ago, or three years ago I should say. It did not have a production of a million drones that short while ago. And so when a palpable threat exists, countries are capable of mobilizing resources at tremendous capacity. So I want to ask the panel to assess the extent to which the rest of Europe perceives a palpable, genuine threat from Russia, enough to justify and motivate an exertion of uncommon effort. 

MATTHIJS: It’s an excellent question. I’m going to give you all, like, thirty, forty-five seconds to respond. Starting with Nathalie Tocci in Rome, before we lose you. Nathalie. 

TOCCI: Well, I mean, James, I actually think this is the most important question of all, because, I think, you know, there is indeed a conversation about money, and about capacities. But then there’s another, I think, parallel conversation about people and psychology. And I think the problem has been that we have looked at Ukraine as, indeed, the good fight, but we haven’t—we still don’t feel it as our fight. And until and unless we do, we will keep on having these conversations about tradeoffs and, oh, well, you know, maybe we can spend a little bit more, and that will make Trump happy. But it’s not going to be, you know, sufficient. It’s certainly going to be nowhere near what we need to do to actually win this fight.  

And so how do we make that psychological kind of switch? And I think this goes back to a point that Liana was mentioning earlier, although she was talking about it in relation to the question of security guarantees. My understanding of why European troops on the ground are so important is not just, quote/unquote, because, given that NATO is—unfortunately, may I add—not an option for Ukraine, European troops on the ground is as good as it gets, right, as far as security guarantees is concerned. But also because the minute in which you have tens of thousands—presumably would have to be tens of thousands—of European troops involved, well, then it does become our fight, right? And then, all of a sudden, the kind of discussions that we’re having about money and capacities acquire a totally different meaning, and all of a sudden appear to be far—you know, far easier than what they have been up until now, when it was, you know, we were altruistically just supporting Ukraine in its good fight.  

MATTHIJS: Yeah. Excellent. Catherine. 

SENDAK: So I would—I would agree everything that was just said. You know, it is a—it is a fact of survival, an existential threat, versus where we get to sit over here, and the luxury of having these conversations in this type of environment. This is something that I talk about with Western European partners all the time. There is an urgency to an extent, right? There seems to be a tap out at some point about the urgency of the issue. Everyone recognizes the threat of Russia on paper, but do we really feel it day to day?  

And to Nathalie’s point earlier, is there a cultural recognition that Russia is already at war with the West, and does everything in its power and its capability to make sure we know that and affect institutions? I mean, the list goes—you know, of malicious deeds goes on and on. I don’t know what that trigger is to change what feels like this isn’t survival for us, this is survival for the country of Ukraine. But we want to make sure it actually doesn’t become an issue of survival for us, which I think is something—that shift needs to happen. 

MATTHIJS: Doug, Liana, very quickly? I’m already breaking the house rule.  

LUTE: I think this is the central point. I mean, most Western European allies don’t view a Russian threat as existential. Now, it’s different if you’re in Estonia, right? But, look, and there’s some data here, right? Remember that the invasion force of 2022, the Russian invasion force in Ukraine, was the product of at least a decade of investment in modernization by Putin in his army. That army’s been destroyed in Ukraine. Ukraine has delivered that product to Western European security, right? So, you know, if you’re saying, well, they could invade a Western European ally next, with what, OK? In fact, the military district opposite Finland—so Finland joins NATO. The Russian military district opposite Finland has been displaced. Where did it go? To Ukraine, OK? 

So, now, that doesn’t mean there’s no Russian threat, but it means that if Europe is to take on greater responsibility for its own security it ought to be very focused on what it invests in. So air and missile defense, yeah, that’s a high priority investment. Cyber security? Right. Infrastructure security? Right. Protecting our electoral processes? Yes, OK. But Russia doesn’t have an army today that threatens Western Europe. I mean—and, frankly, we owe that to Ukraine. 

MATTHIJS: Liana, last words of wisdom. 

FIX: Yeah. Two points. I mean, Russia does try to reconstitute its army with China’s support, right? And that’s what makes me a little bit more concerned, because what China gives is not only what Russia needs in Ukraine. It’s beyond what Russia needs in Ukraine. And Russia is storing that. So the other point, where I am a little bit more optimistic about your question is that Vladimir Putin has never been smart about moving in a tactical way, right? So if Ukraine is—the conflict is resolved in a ceasefire, he could just dial down on threats to Europe, right, and try to make a big European-Russian rapprochement. He will not do it. That’s not what he has ever done.  

So if we can rely on someone to keep the threat perception up, it will be Vladimir Putin. Because he will continue his war against the West. And the list of European CEOs not only the Rheinmetall chief but of others who have been on these lists, will certainly include in the future—or perhaps already include—high-level European politicians. So that is something that Vladimir Putin will not dial down on. And so the threat perception, we can count on Putin to keep that up.  

MATTHIJS: Well, all right. Nathalie, Liana, Doug, and Catherine, thank you for joining today’s discussion. And thank you all for coming. Please note that the video and transcript of this session will be posted on CFR’s website. Thanks, everyone. Have a great week. (Applause.) 

(END) 

This is an uncorrected transcript.