U.S. turn toward Russia threatens deep economic ties with Europe
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U.S. turn toward Russia threatens deep economic ties with Europe
Monday marked three years since the Russian invasion of Ukraine. During that time, the U.S. joined its European allies in not only supporting Ukraine in its ongoing war effort, but also in condemning Russia’s actions through sanctions.
However, in the last few weeks, the tone has changed. President Donald Trump has blamed Ukraine President Volodymyr Zelenskyy for starting the war, and the U.S. has now sided twice with Russia in United Nations votes concerning Ukraine.
That policy turnaround can have consequences not only for Ukraine, but for the rest of Europe. Plus, European countries, at least currently, are not only close American partners in security, but also in trade and investment.
Neil Irwin, chief economic correspondent for Axios, joined “Marketplace” host Kai Ryssdal to talk about the impact of this turn toward Russia, including the potential dissolution of ties with some of the world’s most advanced economies.
The following is an edited transcript of their conversation.
Kai Ryssdal: Give us the status quo ante, if you will, of the EU-United States relationship as of, like, 20th of January, just to pick a date.
Neil Irwin: Well, it was pretty solid. It was kind of the deepest, most intertwined economic relationship in the world, in some ways. Huge cross-border investments, trade flows, financial flows, flows of people, of ideas, of information. And really, that has made both sides of the Atlantic wealthier over the years. That is the status quo as of about a month ago.
Ryssdal: As we turn now, the United States does, to developing a relationship with Russia, as the White House has said it wants to do, can the Russians replace the economic gains the United States has gotten from its relationship with the European Union?
Irwin: No, I think it’s worthwhile to think about just the scale here. Russia is a comparatively small country in terms of its economy, even its population, to the rest of Europe. You know, Russia has a smaller economy than the U.K., Germany, France and Italy individually, let alone put together. In terms of trade flows, there’s not this track record of big, innovative Russian companies, you know, building massive factories abroad in the U.S. or anywhere else. These are just different scales of economic enterprise. And that’s before you get to the kind of diplomatic, cultural, longstanding historical tensions between these countries.
Ryssdal: Just as a note on the whole “longstanding” thing. I mean, the United States has been building its economic relationship with Europe writ large since, like, the Marshall Plan.
Irwin: Yeah. I mean, you go back to World War I, World War II, the U.S. ultimately intervened in both and got involved and then post-World War II has spent the last 70 years, you know, playing a key role, kind of rebuilding Western Europe and making it an economic power. Now, the European economy, to be clear, has a lot of problems, and it’s not as innovative and as fast-growing as I think a lot of people would like to see it be. At the same time, what you have right now is a very large, wealthy continent that has these deep ties with the U.S. that are nothing to shake a stick at. You look around the U.S., you see all these states where European companies are big employers. You have BMW and Volkswagen and Airbus and Siemens doing these, you know, operating these big operations in the U.S. These are the kinds of economic interconnections that are hard to replicate with a much smaller and more remote economy.
Ryssdal: Take the next step on those interconnections because there’s a national security aspect to economic interdependence.
Irwin: Absolutely, and part of the entire theory of postwar U.S.-Europe diplomacy has been that we have an economic interconnection and a diplomatic, geostrategic interconnection that are interrelated. NATO is one side of the coin, economic ties are the other side of the coin. And really, both sides of that coin are tarnished right now, and really not what they were, and that’s happened very rapidly. I mean, certainly first-term Trump had deep skepticism of Europe and hostility toward NATO in certain ways, but he was also not in a position to really unwind those ties in the ways that he has made real progress toward doing in just the first five weeks of this administration. And we saw that over the last few weeks with [Vice President] JD Vance over in Munich, we saw it with the German elections, where the new German chancellor, incoming German chancellor [Friedrich Merz], is basically saying, “We must be independent from the United States.” Those are words that, even a month ago, you would not have expected to hear from a new German chancellor.
Ryssdal: A word here about the rest of the world. There’s a great quote in this piece that you wrote from Hank Paulson, the former secretary of the treasury, about China and what Chinese officials would tell him.
Irwin: Yeah. So Hank Paulson, the former treasury secretary, has said that a Chinese official once told him, “Well, you, the U.S., have all the good allies.” And what they meant by that was Western Europe. You have Germany, you have the U.K., you have France, you have Japan. That’s part of why China has had to form these relationships with Russia, with North Korea, with kind of lesser powers, lesser, you know, economic forces. And, you know, what’s happening right now is kind of the dissolution of that bond between the U.S. and some of its historically closest allies that also happen to be some of the richest and most populous nations on Earth. So, where that leads, we don’t know. How much of it’s rhetoric, how much of it’s kind of bluster, and how much becomes a real dissolution of these economic and other ties, that’s what we don’t know yet. But directionally, we know what way it’s going.
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