At a Crossroads: Rebalancing EU–US Economic Power

For decades, the transatlantic economy has been the quiet giant of globalisation: two blocs trading and investing in each other at massive scale, keeping their current accounts broadly balanced and weaving dense financial, technological and services links that supported growth on both sides of the Atlantic. The new CEPS/European Parliament study makes clear that this part has not changed—EU–US economic ties are still among the deepest in the world and remain the backbone of European prosperity. What has changed is everything around it: US strategic priorities, the rise of China, the return of industrial policy, and a widening gap in technology and productivity. Those shifts make Europe’s long-standing asymmetry—economically interdependent with the US, but strategically more dependent on the US—more visible and less comfortable. Parlement Européen

The study starts from a simple observation: if you look only at trade and capital flows, the relationship still looks impressively even. US investment stocks in Europe and European investment stocks in the US are both huge; European companies produce in the US and export globally from there; services trade, once you include it properly, keeps the US–EU current account close to zero. This is a partnership, not a patron–client setup. Yet the moment you step outside pure economics—into defence, technology standards, digital platforms, AI—Europe is clearly leaning on American capacity. That was acceptable in the post-war order, when US leadership in NATO, the dollar system and multilateral institutions was taken as a given. It is more problematic in a world where Washington is re-ranking its priorities and is increasingly willing to use economic power as a geopolitical tool. Parlement Européen

This growing tension is reinforced by macro and structural divergence. On current data, the US is managing a mix of stronger equity markets, more concentrated tech-driven productivity gains and a policy stance that is at once protectionist, selective and interventionist. The EU, by contrast, faces a weaker growth outlook, slower productivity and an economic structure that spreads gains more evenly but rarely produces the kind of superstar firms that redefine a sector. The report notes that US productivity is likely to pull further ahead, largely because AI-related investment is clustering in a handful of very large, highly capitalised American firms. Europe’s model is more socially balanced, but that very balance makes it harder to match US speed at the technological frontier. When such structural differences are layered on top of an appreciating euro and higher US policy assertiveness, the risk of future misalignment rises. Parlement Européen

Because of this, the authors frame the future not as a single path but as three plausible trajectories. The first is essentially “more of the same”: continued interdependence, but with the EU remaining exposed to US decisions on security, technology controls, sanctions and industrial subsidies. This path preserves economic benefits but keeps Europe vulnerable whenever US domestic politics turns inward or confrontational. The second is “managed divergence”: Brussels accepts that Washington will sometimes move unilaterally, so the EU invests in reducing its strategic dependencies—on defence inputs, on US-centred digital stacks, on specific financial channels—while trying to keep the main economic arteries open. This is the most realistic scenario but it requires time, unity and investment. The third, clearly the least attractive, is an “antagonistic turn,” in which trade disputes, subsidy races, export controls and geopolitical disagreements feed on each other until the transatlantic space fragments. None of the three fully solves Europe’s dilemma, which is why the report insists the EU “has no choice but to strengthen its preparedness to shape a more balanced relationship.” Parlement Européen

Preparedness, in this context, is not a slogan; it is institutional. The paper says outright that the European Parliament’s current oversight tools are not agile enough for today’s fast-moving EU–US economic diplomacy. Trade disputes can flare before Parliament is even formally briefed; regulatory divergences on finance, data or green industry can appear in Washington with little warning; and the traditional multilateral fora that used to offer Europe a counterweight to US power are themselves weaker. The answer, according to the study, is to install early-warning mechanisms inside Parliament so MEPs can spot transatlantic macro, trade and regulatory shifts sooner, and to lean harder on direct channels with US counterparts when multilateral settings do not deliver. A more politically fragmented EU cannot afford to be slow on the file that matters most for its prosperity. CEPS

Running through the whole analysis is a quiet but firm point about time. Moving from asymmetric dependence to a more balanced partnership cannot be done overnight, especially when Europe still benefits hugely from US security guarantees and from access to US financial markets. It will take internal unity, deliberate efforts to cut the most sensitive dependencies, and a clearer articulation of where the EU is willing to align with US geoeconomic strategies and where it is not. The alternative is to let the relationship drift, in which case the current combination—economically intertwined, strategically dependent—will be decided more and more in Washington, not in Brussels. Parlement Européen

Sources: CEPS / European Parliament study, “Risks and Opportunities in Evolving EU–US Financial and Economic Relations,” external author Cinzia Alcidi, requested by the ECON Committee, November 2025; CEPS publication page for the study. CEPS+1