For years now, Europe has been caricatured as too divided to act, too lethargic to decide, too comfortable to think strategically. Yet over the past year, Europe has behaved with a quiet shrewdness that contradicts that stereotype. Faced with an unpredictable United States, it has neither lashed out nor capitulated. Instead, it has adapted.
When President Donald Trump returned to office and unleashed the country’s highest tariffs in nearly a century, many expected Europe to retaliate. A transatlantic trade war would have fed inflation, disrupted supply chains and weakened already fragile growth. Europe resisted the temptation. It absorbed the pressure, avoided escalation and bought time. That restraint prevented a downward global spiral.
Then, last week, Europe acted. After 25 years of stalled negotiations, European Union countries approved a sweeping trade agreement with Brazil, Argentina, Paraguay and Uruguay. If ratified, it will create one of the world’s largest free trade zones by population — more than 700 million people.
Nor is the outreach to Latin America an isolated move. In recent weeks, Brussels and Beijing have signaled that they have resolved a fresh set of trade frictions that had threatened to turn into a broader confrontation over electric vehicles, subsidies and market access. Europe remains wary of China’s industrial policies and political system, but the E.U. now views China as a necessary partner.
At the same time, Europe has accelerated its outreach to Southeast Asia. The E.U. now has trade agreements in force with Singapore and Vietnam, has concluded negotiations with Indonesia, and is pushing ahead with talks across the region. The region is already the E.U.’s third-largest trading partner outside Europe.
This instinct to diversify is spreading far beyond Europe. Consider Canada. For three decades, Ottawa made a clear strategic bet: that its future lay in ever-deeper integration with the U.S. — economically, diplomatically, politically. More than 75 percent of Canadian goods flowed south in 2024. It was one of the most successful integration stories of the post-Cold War era.
That trust has now been shattered. Trump’s tariffs, threats to reopen trade agreements and bizarre declarations about annexing Canada have forced a rethink. Canada’s new prime minister, Mark Carney, has responded by openly seeking distance from Washington. Arriving in Beijing this week, Canadian Foreign Minister Anita Anand put it bluntly: “It is necessary for us to diversify our trading partners, and to grow non-U. S. trade, by at least 50 percent over the next 10 years.” That is not hedging. It’s a strategic reversal.
China’s trade data reveal that the world is not derisking from Beijing but from Washington. Despite sharply reduced exports to the U.S., China’s overall exports continue to rise. Its trade surplus surged to nearly $1.2 trillion in 2025, as shipments to Latin America, Africa, Europe and much of Asia expanded rapidly. Tariffs did not wall China off from the world. They encouraged many countries to keep trading with Beijing.
Public opinion reflects this shift. A major new poll by the European Council on Foreign Relations finds that in key emerging powers — India, Brazil and South Africa — the share of respondents who would prefer their country join an American-led bloc (rather than a Chinese one) dropped by between 15 and 19 percentage points in just two years. Among 10 European countries, only 16 percent now describe America as an ally — a majority still consider the U.S. a key partner — even as views of China remain mixed rather than warm. As Singapore’s former foreign minister George Yeo recently put it, Trump is “fast-forwarding the future … towards multipolarism.”
What is at stake here is not America’s image but its future power. China is methodically building one of the most resilient economic ecosystems in modern history, dominating critical mineral processing, achieving scale in batteries and electric vehicles and diversifying export markets to withstand shocks, sanctions and tariffs.
The only credible U.S. response is not tariffs — which over the past year have coincided with declining manufacturing employment — but ecosystem-building of our own. The United States still has an extraordinary advantage: a vast network of allies and partners that together control most of the world’s advanced technology, capital, skilled labor and consumer demand. In theory, that coalition could source critical materials from friendly countries, spread manufacturing across trusted partners, share research and anchor markets that remain open and predictable.
In practice, America has squandered much of that advantage. By treating allies as transactional customers, weaponizing tariffs against them and turning long-standing commitments into shakedowns, Washington has encouraged others to hedge. Most extraordinary, the U.S. is no longer the trendsetter. It is retreating to protectionism and nationalism while the world is searching for more trade and cooperation.
For decades, the global order was built on an American platform. Trade flowed through U.S.-designed institutions. Security rested on U.S. guarantees. Crises were managed, for better or worse, by Washington. The global agenda was set in Washington. That platform still exists — but the world is no longer building on it. It is building around it.
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