America's Getting Dumped

65,000 people can make a lot of noise, and just a few weeks ago, at San Siro, they chose to channel their attention to JD Vance. Just a few moments earlier, American athletes had entered the stadium to large cheers. The crowd's energy and the celebratory nature of the Olympics were doing exactly what the Games are meant to do and have always done: foster and display a sense of global camaraderie. But then Vance's face appeared on the screens above the stadium, and that brewing unity shattered into pieces.

The booing was narrated live by Canada's CBC correspondent, Adrienne Arsenault. She visibly had to collect herself mid-sentence when commenting on the crowd's reaction. The Guardian's Sean Ingle was also at the ceremony and noted the boos, as did USA Today's Christine Brennan. However, NBC's Peacock broadcast silenced the stadium audio and layered music over the sequence. The American audience heard something much more temperate than what the stadium actually delivered.

Whether that was some form of broadcast policy or merely a reflex is almost beside the point. It revealed a perceptual gap: America still thinks it is essential for its allies, but those same allies have begun realizing the cost of their relationship with the U.S. Indeed, surveys conducted across Europe tracked a double-digit collapse of confidence in U.S. leadership. America's allies are slowly considering the unpredictability of the United States as a threat. Inevitably, that has sparked the erosion of the economic relationship between the U.S. and the EU.

The Relationship, By the Numbers

The transatlantic relationship is the world's largest economic partnership, but it's also the one that Americans talk about least. Together, the U.S. and EU account for 30% of global trade in goods and services and approximately 44% of global GDP. From a comparative lens, U.S.–EU goods trade totaled €867 billion (approximately $1.01 trillion) in 2024. U.S.–China goods and services trade only reached just $650 billion in the very same year.

The relationship between the U.S. and the EU runs significantly deeper than trade figures alone suggest. Mutual foreign direct investment (FDI) between the EU and the US stands at a cumulative stock of $7.4 trillion. Capital is so deeply embedded on both sides that it supports more than 16 million jobs across the Atlantic. In fact, European majority-owned affiliates directly employ over 5 million American workers.

But interdependence is most visible in the security arrangement of NATO. While European allies have finally increased investment to meet the 2% GDP defense spending guideline, they remain tied to U.S. military policy, which provides the $980 billion in annual defense spending, 62% of NATO’s total security spending.

Beyond the defense sector, the American dollar itself underpins 90% of all daily international exchange transactions and constitutes 56% of global reserves. Together, all of these dependencies push the European economy into becoming interwoven within America’s system, which is specifically designed to make the cost of decoupling so expensive that any relationship has to persist out of a lack of any viable alternative.

When a Partner Starts Behaving Like a Creditor

A dependency priced as a partnership works until one side starts using it as leverage. The second Trump administration is doing just that via tariffs on European steel and aluminum, coupled with threats of sectoral levies on autos and pharmaceuticals.

Policy volatility forces European firms to plan for threats. Only the U.S., a former reliable partner, now contributes the most uncertainty, driven by the threat of dollar weaponization. In essence, Washington can subject Europe and its firms to large sanctions and other fiscal policy measures without fearing a comparable response, as dollar-dependency is a global economic issue. Therefore, the U.S.’s power over the dollar threatens the sustenance of the European economy at large, forcing firms to treat American allyship as a considerable risk—one that they can not avoid.

The most notable model concerns Russia. When the United States and the European Union banned Russia and seven of its largest banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and froze €260 billion ($301 billion) in the Kremlin’s invasion of Ukraine, allies were forced to watch as dollar weaponization occurred in practice.

The intended message was deterrence. The received message in Europe was a demonstration of what financial dependency on American-controlled systems actually meant in practice, and what that looked like when weaponized.

Getting Its Affairs in Order

When trust in an ally erodes, the cost of reliance rises while exit stays expensive. That calculation is spreading amongst America’s allies, reaching Japan, Canada, South Korea, and, most importantly, the EU.

In Europe, this transition has led to SAFE, a €150 billion defense procurement fund that explicitly excludes the United States. This exclusion is structural, with at least 65% of the value of weapons systems needing to be produced within an EU member state or an EEA or EFTA country. Nineteen member states have already indicated their intent to participate, requesting support beyond the currently available budget.

SAFE is the first pillar of the broader Readiness 2030 package, which is designed to mobilize up to €800 billion in total EU defense investment. It is specifically architected to build European defense industrial capacity entirely independent of American supply chains.

Breaking Up is Expensive, but Staying is Getting More So

Indeed, breakups are expensive. That cost has historically functioned as the argument for staying. What changes is the expected cost of continued dependency once the relationship becomes unreliable.

The 2022 energy shock serves as a precedent. Europe had spent 30 years building a deep reliance on cheap Russian natural gas, which by 2021, accounted for 45% of total EU natural gas imports. This dependency made economic sense year after year, even generating consistent political resistance to diversification. But when Russia invaded Ukraine, the exit bill arrived all at once. Energy prices reached record levels in 2022, while Germany—the bloc’s industrial engine—saw its economy contract by 0.3% in 2023. To prevent a total collapse, European governments collectively mobilized €646 billion in an attempt to stabilize household energy costs. Yet, the exit happened anyway. When the political will materialized, Europe bore a transition it had long insisted was impossible.

Europe’s dependency on Russia felt and looked rational until Russia abruptly made it irrational. The exit cost of the relationship remained high, but the invasion increased the cost of staying, and started to close the gap between the two; exiting looked like a significantly more viable option. Economists characterize this as a volatility premium, where countries and their firms have to pay for increased risk. Today, this premium is the price of insuring against the possibility of dollar weaponization.

The Boos Americans Aren’t Hearing

Therefore, a fully detached European Union from the United States, capable of independent defense and deeply integrated capital markets, is a project with a real price tag. Defense spending redirected from consumption is consumption foregone. Common debt instruments carry real sovereign fiscal risk, and building markets deep enough to rival Wall Street takes decades. These constraints are true and difficult to avoid.

We are witnessing the effects of this tension unfold in real time within the German automotive industry. Firms like Volkswagen and Mercedes-Benz have long operated on the assumption that they could maximize their global reach by treating the U.S. and China as complementary markets. Today, that model has been destroyed as they are effectively being forced to pick a side.

As the United States restrict supply chains via tariffs and trade barriers, European automakers find themselves caught in the crossfire, unable to maintain their Chinese footprint without risking their market access in America. In effect, these firms are now spending billions to create redundant supply chains, producing cars in America for Americans and in China for the Chinese to safeguard themselves against current and future policy volatility.

These sorts of stakes that Europe and its firms are facing may very well justify the negotiations happening right now on SAFE, on Readiness 2030, on Draghi's investment agenda, on common debt, and procurement explicitly designed to exclude America. All are proceeding without American participation and in direct response to American behavior.

The transatlantic relationship will not end suddenly. It will thin gradually through procurement rules, financial plumbing, supply chains, and investment decisions. The architecture that once made separation prohibitively expensive is slowly being redesigned.

The Olympics served as a preview of this new world. When Vance was booed, the CBC correspondent collected herself and moved on, while NBC's broadcast played music over the noise. But the crowd in Milan had already said what it came to say, and Europe heard it just fine. The sound of a continent beginning to build a future that no longer assumes an American partner is guaranteed or necessary.