TEMPO.CO, Jakarta - This year's annual meeting of the World Economic Forum (WEF) in Davos was always going to be a Donald Trump show. After all, the US president, who is returning to Davos after six years, is responsible for much of the fragmentation of the global order that the Davos crowd expects to discuss during the five-day event.
But by threatening some of the closest US allies with tariffs to coerce them into supporting his plans to annex Greenland from Denmark, a NATO member, Trump has raised the stakes several notches higher.
For the European leaders descending on the Swiss Alpine town, the tariff threat is yet another major blow to the already damaged transatlantic relationship.
The European Union has hit back against Trump's threats, even drawing up retaliatory economic measures against US companies and discussing the use of its so-called Anti-Coercion Instrument (ACI) that can limit US firms' access to the massive EU single market.
The episode has once again underscored Europe's need to shrug off its complacency and reassess its reliance on the US for everything from defense to technology, a theme that's also a big talking point at the WEF meeting.
EU Commission President Ursula von der Leyen told WEF participants that the "seismic change" Europe was currently going through was "an opportunity," and in fact "a necessity to build a new form of European independence."
"The truth is also that we will only be able to capitalize on this opportunity if we recognize that this change is permanent," she added.
An Opportunity for Europe
EU leaders have thus far tried to keep Trump from turning their trade and diplomatic issues into a full-blown rupture in transatlantic relations. This has come at the cost of diplomatic and economic setbacks. For example, they were sidelined from of the Ukraine peace talks despite being Kyiv's largest military and financial backers, and signed off on a lopsided trade deal with the US.
Some experts say Europe should be more forceful in its dealings with the US, given the huge leverage it enjoys. The region is not only a huge market for US companies but also America's biggest lender, owning trillions of US bonds and equities, almost twice as much as the rest of the world combined. This is significant, considering how much the US relies on debt to pay its bills.
They point to China's example. Beijing used its control over rare-earth metals to force Trump to back down on his exorbitantly high tariffs. While dumping US treasuries is easier said than done, the EU is already considering measures that could make life difficult for US firms dealing with the bloc.
But there are others who agree with von der Leyen that the EU should take this opportunity to address its long-term challenges, even as it deals with the growing tensions with the United States in the short term.
"The more productive you are, the more competitive you are, the more leverage you have in the world," Matthias Tauber, head of operations in Europe at the Boston Consulting Group, told DW. " Recent developments underscore just how critical productivity and competitiveness are. This is where Europe needs to raise its game."
Struggling Economy and Lost Competitiveness
The European economy has been growing at subdued, modest pace for years now, held back by deeper structural issues such as slow decision making because of its complex governance structure, a less flexible regulatory framework, energy insecurity and its dependency on imports for critical raw materials.
Some of the structural issues have caused Europe to fall further behind the US in economic growth, disposable-income gains, and productivity, making it less attractive for investments. Many European firms, particularly the newer ones, have struggled to raise investments because capital markets across Europe are small and fragmented.
Many of these issues are well-known and were also highlighted in a report on European competitiveness by former European Central Bank (ECB) chief Mario Draghi in 2024. But more than a year later not much progress has been made on Draghi's recommendation.
Von der Leyen covered these challenges in her Davos speech, including the need for creating a more predictable and simple regulatory environment.
"We live in an age where capital or data can cross Europe in a second. And business must be able to move just as freely," she said.
Diversifying Risks, Cutting US Reliance
The changed global order that von der Leyen referred to is already creating a sense of urgency within the EU as evidenced by the signing of a mega free trade deal with the Mercosur trade bloc in South America after 25 years of negotiations, as well as another one waiting to be signed with India.
The bloc is also investing heavily in defense — hundreds of billions of euros collectively — as it looks to lessen dependence on non-EU countries, including the US.
There is yet another dependency that the EU is looking address: its overreliance on US Big Tech companies. German companies like Siemens and SAP are already working to ensure that Europe cuts its reliance on US technology, but they rule out a complete decoupling.
The Siemens CEO of Digital Industries, Cedrik Neike, told DW that it would be "foolish" to think that Europe would ever be able to produce European software, or personal computers equipped with GPUs and all the other components needed.
"The reality is that the world is extremely dependent. We can reduce the risk, but we can never eliminate our reliance," he said.
Read: How Can the EU Respond to U.S. "Blackmail" Over Greenland?
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