Trump vs. EU: 3 Trade Flashpoints to Watch in 2026

When the U.S. government releases its 2025 trade data, the numbers are unlikely to please President Donald Trump. Despite his focus on tariffs to shrink the trade deficit, the data shows the opposite trend. In the first 10 months of 2025, the U.S. goods deficit grew by $77 billion, an increase of nearly 8 percent year-over-year.

This widening gap will likely prompt a search for the main culprit, but for the first time in recent history, the answer isn’t China. Instead, the European Union has become the largest source of the U.S. trade deficit, reaching approximately $190 billion in the first three quarters of 2025. During the same period, the deficit with China shrank by 28 percent to $175 billion, while the EU’s surplus remained stable.

This shift could trigger a direct confrontation with the EU. Based on the administration’s recent actions, three potential strategies could emerge, creating major wild cards for trans-Atlantic relations in 2026: weakening the dollar, shifting defense costs to Europe, and cutting strategic deals with Russia.

Wild Card 1: Forcing a Weaker Dollar

A 2024 essay by U.S. Federal Reserve Board member Stephen Miran outlines the logic for a future trans-Atlantic trade battle. The core argument is that an overvalued dollar hurts the U.S. by making imports artificially cheap and exports too expensive. The solution, therefore, might be to deliberately weaken the dollar. Goldman Sachs has flagged this as a key scenario to watch in 2026.

One way to achieve this would be to compel foreign nations to sell their holdings of U.S. Treasury securities. The upcoming G-7 summit in Evian, France, in June presents a perfect opportunity. Collectively, EU countries own about one-fifth of all foreign-held U.S. Treasurys. At the summit, Trump will meet with the leaders of Britain, France, Germany, and Japan—the four largest global holders of this debt.

He could use the meeting to demand they sell their U.S. debt or face punitive measures. If the G-7 complies, his focus could then shift to other major holders like China at the G-20 summit in Florida later in the year.

For Europe, this demand would be a nightmare. European-held U.S. Treasurys are owned by a diverse mix of central banks and private funds, making a coordinated response nearly impossible. Furthermore, a sharp fall in the dollar would cause the euro to appreciate, devastating European exporters. With nearly one-third of EU exports invoiced in dollars, a weakening greenback is a greater fear than U.S. tariffs. In 2025 alone, the dollar lost about 12 percent of its value against the euro, and a further slide would be disastrous.

Wild Card 2: A New Burden-Sharing Network

The Trump administration's 2025 National Security Strategy contains another alarming element for Europe. The document proposes a new "burden-sharing network" where NATO allies would contribute more to military expenses.

This demand may surprise many European policymakers who believed the issue was settled. In June 2025, NATO members pledged to spend 5 percent of their GDP on defense by 2035, a commitment many EU capitals saw as final.

The strategy document clarifies how this network would function:

• U.S.-Led: The network would be entirely controlled by Washington.

• Pay-to-Play: Contributing to the network would unlock benefits, such as relief from U.S. tariffs and discounts on American military equipment.

The U.S.-hosted G-20 summit could be the moment these demands are officially made. Washington’s decision to invite Poland as the only non-G-20 member is strategic. In 2025, Poland spent nearly 4.5 percent of its GDP on defense, making it NATO's largest military spender by that measure. Trump could use Warsaw as a model to pressure other allies into joining his proposed network.

Wild Card 3: Strategic Deals with Russia

A final wild card involves negotiations with Russia and Ukraine. The National Security Strategy emphasizes a resource-centric foreign policy focused on securing critical minerals and expanding fossil fuel production. This opens the door for Trump to make deals with Moscow that benefit U.S. companies at the expense of their European rivals.

Squeezing Europe on Minerals and Energy

Russia is a dominant global supplier of several critical minerals, including:

• Palladium (42% of global supply)

• Antimony (23%)

• Vanadium (19%)

• Platinum (12%)

• Magnesite (11%)

A deal giving U.S. firms preferential access to Russian palladium and titanium would put European automotive and aerospace industries in a vulnerable position, as the EU relies on Russian supplies for these materials.

On fossil fuels, recent Russian decrees suggest a pathway for U.S. energy companies to return. In August 2025, Moscow authorized foreign firms to return to the Sakhalin-1 oil and gas project. U.S. giant ExxonMobil, which held a 30 percent share before its $4.6 billion investment was seized in 2022, stands to benefit. In December 2025, a decree from Russian President Vladimir Putin extended the deadline for ExxonMobil to sell its stake by a year, to 2027.

Washington knows that a complete lifting of sanctions on Russia is unlikely, as they are supported by the G-7, Britain, Canada, and Japan. However, this could work to the U.S.'s advantage. The administration could issue sanctions waivers to American companies like ExxonMobil, allowing them to invest in Russia while European competitors remain locked out. This approach mirrors the licenses Chevron has received to operate in Venezuela since 2019.

Preparing for an Unpredictable Year

As French scientist Louis Pasteur noted, "Luck only favors the prepared mind." Washington’s surprise seizure of Venezuelan leader Nicolás Maduro on January 3 is a stark reminder of its capacity for unpredictable action. As European leaders plan for 2026, preparing for these wild-card scenarios is essential. While it may be difficult to change Trump's course, proactive planning could help the bloc avoid being caught completely by surprise.