The transatlantic economic confrontation escalated sharply Wednesday as Donald Trump threatened "big retaliation" against Europe if the continent follows through on plans to redirect hundreds of billions in capital away from American markets.
The warning came hours after French President Emmanuel Macron announced that all 27 EU member states had agreed to establish the Savings and Investment Union - a major step toward the full Capital Markets Union that Brussels has pursued for years. Macron declared that €300 billion in European savings currently flowing to the US annually would now be invested in Europe.
"If they do that, there will be big retaliation," Trump told reporters, without specifying what form such measures would take.
The exchange marks a fundamental shift in transatlantic relations. For decades, European pension funds, insurance companies, and investors have poured capital into American markets, attracted by deeper liquidity, higher returns, and the dollar's reserve currency status. That arrangement has helped finance US deficits and corporate growth while leaving European companies starved for domestic capital.
Brussels decides more than you think. This single agreement just changed the global flow of capital - and Trump knows it.
The Capital Markets Union has been an EU dream since 2015, repeatedly blocked by national governments protecting their own financial sectors. That all 27 states agreed in principle represents a breakthrough, though the details - always devilish in Brussels - remain to be negotiated.
The initiative would harmonize securities regulations across the bloc, create a true pan-European stock exchange, and make it easier for European companies to raise capital at home rather than listing in New York. For investors, it would mean a unified market of 450 million people rivaling America's depth.
"This is about European sovereignty," Macron said in Davos, where EU leaders have spent the week signaling a new assertiveness in response to Trump's Greenland threats and tariff warnings. "We cannot depend on American goodwill when that goodwill has proven unreliable."
The €300 billion figure - roughly 2% of EU GDP annually - has been documented by the European Central Bank. It represents the structural capital flight that has weakened European growth for a generation. Reversing that flow could provide the investment Europe needs for its green transition, defense buildup, and tech sector development.
But Trump's retaliation threat is no idle bluster. Washington could impose tariffs on European exports, restrict access to US capital markets, or leverage the dollar's dominance to punish European financial institutions. The question is whether Europe is finally willing to accept the costs of independence.
Germany's Finance Ministry declined to comment on Trump's threat. France issued a terse statement: "Europe makes sovereign decisions about European capital."
The European Commission will present detailed legislative proposals for the Capital Markets Union in March. Getting all 27 member states to agree on the actual rules - from bankruptcy law to pension regulations to tax treatment - will be the real test. Brussels has a habit of announcing grand visions and delivering bureaucratic compromises.
But this time feels different. Trump's Greenland antics shocked even the most Atlanticist Europeans into recognizing that the old rules no longer apply. When the American president threatens to invade NATO allies, depending on American markets starts looking like a strategic vulnerability.
According to video of Macron's announcement, the French president was blunt: "The world has changed. Europe must change with it."
Trump's immediate threat of retaliation suggests he understands what's at stake. American capital markets have benefited enormously from European money - €300 billion annually is not trivial. Losing that flow would mean higher borrowing costs for US companies and potentially weaker stock valuations.
The coming months will test whether Europe's political will matches its rhetoric. Building the institutional infrastructure for a true Capital Markets Union requires harmonizing regulations that national governments have guarded jealously. France and Germany will need to agree. Ireland will need to accept changes to its corporate tax haven status. Luxembourg will need to open its secretive fund industry.
But for the first time in years, Brussels has momentum. And Trump's threat may be the best gift he could give European integrationists - nothing unites Europe faster than American bullying.
Brussels decides more than you think. Today they decided that European money should work for European priorities. Trump's job now is to decide whether threatening your allies is really cheaper than competing for their capital.
