WEBVTT -  Can Europe Break Up With the US?

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Certain places in Europe

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<v Speaker 1>are not even recognizable. Frankly anymore, they're not recognizable.

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<v Speaker 2>In his second term, President Donald Trump has been upending

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<v Speaker 2>global trade and breaking geopolitical norms faster and more dramatically

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<v Speaker 2>than in his first and a lot of that is

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<v Speaker 2>playing out with his relationship to Europe.

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<v Speaker 1>I love Europe and I want to see Europe go good,

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<v Speaker 1>but it's not heading in the right direction.

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<v Speaker 2>After a striking speech from the President in Davos last

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<v Speaker 2>week where he rashed it up the pressure on countries

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<v Speaker 2>who opposed his goal of acquiring Greenland, European leaders gathered

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<v Speaker 2>at an emergency meeting to consider how to respond. The

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<v Speaker 2>mood was grim.

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<v Speaker 3>The word shell shocked is not too much of an exaggeration.

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<v Speaker 2>Suzanne Lynch is Bloomberg's Brussels bureau chief.

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<v Speaker 3>I think the feeling in Europe after Donald Trump reiterated

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<v Speaker 3>his threat to Greenland and to tariff to put extra

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<v Speaker 3>tariffs on a number of European countries over their opposition

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<v Speaker 3>to Trump's plans on Greenland really took European leaders by surprise.

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<v Speaker 2>Just a few months ago, the US and the European

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<v Speaker 2>Union agreed to a new trade deal, but European leaders

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<v Speaker 2>suspended the approval of that deal in response to Trump's

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<v Speaker 2>tear threats over Greenland. Hours later, Trump walked them back. Now,

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<v Speaker 2>many leaders in Europe feel like the time has come

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<v Speaker 2>to reconsider the continence relationship with the US on a

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<v Speaker 2>fundamental level and to be prepared to push back even harder.

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<v Speaker 3>I think what they're wondering now is can they trust

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<v Speaker 3>the United States administration? What happened if in two or

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<v Speaker 3>three weeks, in two or three months, Donald Trump again

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<v Speaker 3>threatened to tariff or indeed threatened to annex Greenland again,

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<v Speaker 3>Should the European Union be more forceful and be ready

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<v Speaker 3>for this kind of action by the President and really

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<v Speaker 3>stand up to the US in a stronger way if

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<v Speaker 3>this happens again.

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<v Speaker 2>And says it'll take time for the European Union's twenty

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<v Speaker 2>seven member states to align on what to do next.

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<v Speaker 2>But one thing seems clear.

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<v Speaker 3>Europe feels that the United States has crossed the rubicon here,

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<v Speaker 3>that it cannot depend on the United States as an ally,

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<v Speaker 3>either in the defense or in the economic sphere, and

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<v Speaker 3>that really Europe has to look after itself.

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<v Speaker 2>I'm David Gera, and this is the big take from

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<v Speaker 2>Bloomberg News today on the show, how Europe could fight

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<v Speaker 2>back against the US as it makes moves to stand alone.

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<v Speaker 2>President Trump's threat to punish European nations with additional tariffs

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<v Speaker 2>is the latest chapter in what's shaping up to be

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<v Speaker 2>a long story, but his speech at Davos last week

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<v Speaker 2>led to more serious talk among European leaders about how

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<v Speaker 2>they should respond and how they could retaliate. I asked

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<v Speaker 2>Bloomberg Suzanne Lynch what tools Europe has to push back

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<v Speaker 2>on the US and President trum starting with what's been

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<v Speaker 2>called the trade bazooka, the Anti Coercion Instrument or ACI.

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<v Speaker 3>It's one of these acronyms, the ACI, that the EU

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<v Speaker 3>loves to use, but it's important. Look, this was a

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<v Speaker 3>new tool that the EU agreed on a few years ago,

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<v Speaker 3>and really its objective was to potentially counter China in

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<v Speaker 3>the future. They didn't necessarily think it would be something

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<v Speaker 3>they might use for the United States. But here we are.

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<v Speaker 2>Can you explain what that is exactly and how it

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<v Speaker 2>would work if it were implemented.

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<v Speaker 3>It would allow the European Union it would have to

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<v Speaker 3>agree to this a majority of countries and to hit

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<v Speaker 3>back on the United States if it felt or other

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<v Speaker 3>countries if it felt it was engaging in course of

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<v Speaker 3>trade practices. And then once they would make that decision,

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<v Speaker 3>then they would have to take another vote on what

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<v Speaker 3>measures to take. So in other words, we don't know

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<v Speaker 3>what measures yet. They would have to decide that. But

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<v Speaker 3>what this tool does allow the EU to do is

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<v Speaker 3>hit really the services sector, for example, potentially increased time

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<v Speaker 3>axes on US tech companies, curb US access to procurement

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<v Speaker 3>markets in the European Union. These are the kind of

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<v Speaker 3>trade connections and deep links that the United States services

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<v Speaker 3>in industry, the United States tech companies have into the

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<v Speaker 3>European Union. They're less easy to quantify. They're not just

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<v Speaker 3>products getting on ships and moving between Europe and America.

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<v Speaker 3>But at the Europeans feel that they really could hit

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<v Speaker 3>America hard with this, and the US knows this.

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<v Speaker 2>In the days leading up to President trump'speech in Davos,

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<v Speaker 2>Suzanne says the pressure was building within the EU to

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<v Speaker 2>consider using that trade bazooka. Trump's decision to take those

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<v Speaker 2>additional tariffs off the table has alleviated some of that pressure,

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<v Speaker 2>but it's left many EU leaders feeling unsure that the

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<v Speaker 2>status quo will hold.

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<v Speaker 3>The question is will they do that again? And I think, look,

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<v Speaker 3>there's a broader issue, in a broader soul searching going

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<v Speaker 3>on in Europe now about how they've handled Donald Trump

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<v Speaker 3>for years, for decades, the European Union always said, and

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<v Speaker 3>rightfully so, that they're big plus. Their big advantage is

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<v Speaker 3>their single market. The EU is a market of four

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<v Speaker 3>hundred and fifty million people. It's a very very important

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<v Speaker 3>trade partner for the United States. It's got a lot

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<v Speaker 3>of power in the regulatory space, for example, regulating tech companies.

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<v Speaker 3>So its force as an economic power is much more

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<v Speaker 3>powerful than its force as a defense power. For example,

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<v Speaker 3>that's more for NATO, not the European Union. Last summer,

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<v Speaker 3>it agreed on this trade deal that was pretty much

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<v Speaker 3>suboptimal for the EU, and now there is a school

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<v Speaker 3>of thought that that was a strategic blunder by the EU.

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<v Speaker 3>So I think now the conversation is that the EU

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<v Speaker 3>needs to show, according to some people, that it's got

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<v Speaker 3>the muscle for the fight, it's got the appetite for

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<v Speaker 3>a fight if it needs to, And in the meantime,

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<v Speaker 3>it's looking to try and strengthen its own single market,

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<v Speaker 3>get rid of some of that regulatory burden that's holding

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<v Speaker 3>back investment in Europe, that's holding back the development of

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<v Speaker 3>the capital markets unions in Europe, and it's holding back

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<v Speaker 3>businesses in Europe. Because this is something that the EU

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<v Speaker 3>does need to work on and try and close that

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<v Speaker 3>competitiveness gap that it has with the United States.

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<v Speaker 2>If Europe doesn't reach for that bazooka, are there smaller

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<v Speaker 2>weapons of retaliation that Europeans can go to?

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<v Speaker 3>There are? I mean, the other main option it had

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<v Speaker 3>and has is that it has a series of countermeasures

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<v Speaker 3>of tariffs that it could impose very quickly if it

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<v Speaker 3>needed to. And that's about ninety three billion euro worth

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<v Speaker 3>of tariffs they could hit US goods with.

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<v Speaker 2>And these are, if you.

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<v Speaker 3>Like, on the books, and they could be activated if

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<v Speaker 3>these tariff threats return or if Donald Trump acts again

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<v Speaker 3>in a more course of manner towards the EU when

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<v Speaker 3>it comes to trade.

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<v Speaker 2>Another option Europe could target the US tech sector.

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<v Speaker 3>The EU has huge regulatory oversight into tech companies and

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<v Speaker 3>most of the big tech and social media companies operation

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<v Speaker 3>in Europe are American now with a lot of figures

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<v Speaker 3>close to Donald Trump, people like JD. Evans take in

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<v Speaker 3>a big interest in US tech companies, so like that

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<v Speaker 3>is also something to watch. How does the EU respond

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<v Speaker 3>in terms of its regulatory powers. Look, the European Commission

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<v Speaker 3>is saying all the time that it looks at each

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<v Speaker 3>on a case by case basis, that it does not

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<v Speaker 3>have a bias against the United States. But ultimately this

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<v Speaker 3>is something that the EU does have power over when

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<v Speaker 3>it comes to US tech companies operating in Europe.

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<v Speaker 2>There was this moment during Davos when a Danish pension

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<v Speaker 2>fund offloaded a bunch of US treasuries, and we saw

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<v Speaker 2>the Treasury Secretary Scott Besson downplay that. He talked about

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<v Speaker 2>Denmark's insignificance and the insignificance of what that pension fund did.

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<v Speaker 2>But then President Trump had kind of a totally different answer.

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<v Speaker 2>He seen a lot less blase about that effort to

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<v Speaker 2>get rid of US treasuries. How do you think about

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<v Speaker 2>that moment in the context of potential retaliation, the kind

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<v Speaker 2>of financial might that these countries could bring to bear.

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<v Speaker 3>It's been a fascinating topic of discussion here.

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<v Speaker 1>Yeah.

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<v Speaker 3>Absolutely, I mean this idea that trading partners of the

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<v Speaker 3>United States in the United States could use their leverage

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<v Speaker 3>as holders of US bonds is a fascinating one. We

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<v Speaker 3>reported during the week that this particular Danish pension fund

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<v Speaker 3>was going to sell off one hundred million dollars in

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<v Speaker 3>US treasuries. And however, look in one way, this is

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<v Speaker 3>a small fry when it comes to the bigger picture

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<v Speaker 3>of the amount of treasuries that are out there. But

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<v Speaker 3>at the same time, I do think it is given

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<v Speaker 3>some people, at least in the administration, maybe, as you say,

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<v Speaker 3>Donald Trump himself, food for thought about this reality about

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<v Speaker 3>the stock of US treasuries, the reputation of US treasuries,

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<v Speaker 3>and the ability of others to hit back, even though

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<v Speaker 3>a lot of these treasuries are in fact held privately.

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<v Speaker 2>Coming up next, President Trump says he's reached a framework

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<v Speaker 2>deal with NATO over Greenland's future. Will it de escalate

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<v Speaker 2>tensions between the US and the EU or make them worse?

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<v Speaker 2>The reversal happened in just a few hours. President Trump

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<v Speaker 2>went from threatening Europe on the world stage to announcing

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<v Speaker 2>in a social media post that he and NATO Secretary

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<v Speaker 2>General Mark Ruta had agreed on a framework for a

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<v Speaker 2>future deal with respect to Greenland and, as the President

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<v Speaker 2>put it, the entire Arctic region. Trump also walked back

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<v Speaker 2>his tariff threats, but whether that deal could de escalate

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<v Speaker 2>tensions with the EU remains to be seen. I asked

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<v Speaker 2>Bloomberg Suzanne Lynch, what we've learned about that framework agreement

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<v Speaker 2>since Trump announced it.

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<v Speaker 3>I think what's very interesting about this is that, in

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<v Speaker 3>one way, a lot of what this deal seems to

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<v Speaker 3>be emerging as are a lot of the ideas that

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<v Speaker 3>the Europeans had been suggesting to the US administration in

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<v Speaker 3>the days running up to Davos. This idea that NAJO

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<v Speaker 3>itself could expand at Bolster is present in the Arctic.

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<v Speaker 3>So I mean, I think that's important to say that.

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<v Speaker 3>Even though, as we know, Mark rit To, the National

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<v Speaker 3>Secretary General, did have a big role in convincing Donald

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<v Speaker 3>Trump on Wednesday in Davas to rope back from his threats,

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<v Speaker 3>I think interestingly, there were some back channels and some

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<v Speaker 3>discussions about this beforehand. Now what is different is that

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<v Speaker 3>we heard Donald Trump talking, for example, about a golden

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<v Speaker 3>dome in Greenland during his speech at Davas.

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<v Speaker 2>His missile defense system like the one that exists in

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<v Speaker 2>Israel exactly.

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<v Speaker 3>He mentioned that specifically, Bloomberg was reporting during the week

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<v Speaker 3>that the US wants to rewrite its nineteen fifty one

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<v Speaker 3>agreement with Denmark so that any military presence can be

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<v Speaker 3>limited in Greenland. We also know that there is going

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<v Speaker 3>to be more of a presence of the United States

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<v Speaker 3>in Greenland now. I mean, the Danes have been saying

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<v Speaker 3>from the get go that the United States made the

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<v Speaker 3>decision to take out their military from Greenland to dial

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<v Speaker 3>that down, and they were welcome to dial that back

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<v Speaker 3>up at any point. But look, we do know that,

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<v Speaker 3>and this framework deal will entail the stationing of US missiles,

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<v Speaker 3>will involve mining rights that are aimed at keeping Chinese

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<v Speaker 3>interests out, and will involve a bolstered NATO presence in

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<v Speaker 3>the Arctic.

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<v Speaker 2>How do the Danes and Greenlanders feel about both the

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<v Speaker 2>framework for this deal and also the process by which

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<v Speaker 2>we've gotten to this point.

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<v Speaker 3>Look, this is a huge subject, a huge topic for Denmark.

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<v Speaker 3>It's a small country, but it's a powerful country. Denmark

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<v Speaker 3>has been a member of the European Union for over

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<v Speaker 3>fifty years now. It was one of the earlier members

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<v Speaker 3>of the Union it's Prime Minister Meta Friedrison is very

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<v Speaker 3>well known, very very prominent figure on the European political scene,

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<v Speaker 3>and it was interesting that she made the point that

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<v Speaker 3>she welcomed the development last Wednesday in Davos, where Donald

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<v Speaker 3>Trump agreed to a framework deal. She welcomed the move

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<v Speaker 3>by Mark Rutte, but she also made the points that

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<v Speaker 3>Ruta could not nego on behalf of Denmark. That's not

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<v Speaker 3>his prerogative as she sought. And of course the two

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<v Speaker 3>governments are saying that the government in Greenland and Denmark

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<v Speaker 3>that the island is not for sale, that sovereignty is

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<v Speaker 3>not up for discussion, but that they're open to talks

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<v Speaker 3>on issues like security and economic development. But look, undoubtedly

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<v Speaker 3>this has really taken you know, the Danish people, the

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<v Speaker 3>Danish government and the people of Greenland by surprise. And

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<v Speaker 3>one of the objectives for Meta Frederickson as Prime Minister

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<v Speaker 3>of Denmark is to ensure that the European Union, and

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<v Speaker 3>more importantly really that NATO is behind Denmark and has

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<v Speaker 3>got its back.

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<v Speaker 2>A question for you, Susayne, that's kind of geopolitical meteorology.

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<v Speaker 2>I'm wondering how much the temperature has come down as

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<v Speaker 2>a result of President Trump backtracking in the way in

0:12:44.080 --> 0:12:45.520
<v Speaker 2>which he has.

0:12:45.920 --> 0:12:47.240
<v Speaker 3>Yeah, I mean the way I put it during the

0:12:47.240 --> 0:12:49.679
<v Speaker 3>week when we were writing about this so much, I mean,

0:12:49.679 --> 0:12:51.080
<v Speaker 3>it was such a big moment. Was you know, the

0:12:51.120 --> 0:12:53.560
<v Speaker 3>crisis had been averted, that is for sure, But I

0:12:53.559 --> 0:12:56.600
<v Speaker 3>think the trust has been completely broken, There's no doubt.

0:12:56.720 --> 0:12:59.480
<v Speaker 3>I think there's been a lot of wishful thinking that

0:12:59.559 --> 0:13:04.520
<v Speaker 3>you know, ultimately the Transatlantic Alliance will get through this.

0:13:05.080 --> 0:13:08.800
<v Speaker 3>That Donald Trump, particularly after last summer when the Natal

0:13:08.880 --> 0:13:11.560
<v Speaker 3>Summit that happened in the Hague went out pretty well.

0:13:11.840 --> 0:13:15.720
<v Speaker 3>European allied members of NATO agreed to increase their spending

0:13:15.760 --> 0:13:18.679
<v Speaker 3>of five percent of GDP. Donald Trump left the Hague

0:13:18.720 --> 0:13:22.240
<v Speaker 3>a happy person back to America, claiming and rightly saying

0:13:22.320 --> 0:13:26.280
<v Speaker 3>that he had succeeded in encouraging European members to cough

0:13:26.360 --> 0:13:28.360
<v Speaker 3>up more for the alliance and seemed to be committed

0:13:28.440 --> 0:13:30.240
<v Speaker 3>to that. So I think there was a sense that

0:13:30.280 --> 0:13:32.439
<v Speaker 3>things were going to be back on track, but this

0:13:32.880 --> 0:13:37.840
<v Speaker 3>Greenland issue had really really taken people by surprise, and

0:13:37.880 --> 0:13:40.240
<v Speaker 3>there's been a lot of anger. I think. Look, I

0:13:40.240 --> 0:13:43.800
<v Speaker 3>think at the summit on Thursday, the overwhelming view was

0:13:44.320 --> 0:13:46.880
<v Speaker 3>we're shaken by this and we are no longer going

0:13:46.920 --> 0:13:50.080
<v Speaker 3>to be naive. But let's try and be pragmatic about

0:13:50.080 --> 0:13:52.440
<v Speaker 3>it and get this relationship back on track. I think

0:13:52.520 --> 0:13:56.960
<v Speaker 3>wayna minds is the serious issue of Ukraine. The Europeans

0:13:57.040 --> 0:13:59.640
<v Speaker 3>know that they need the United States to remain engaged

0:13:59.679 --> 0:14:04.160
<v Speaker 3>in this and that is of existential importance to Europe.

0:14:04.400 --> 0:14:05.960
<v Speaker 3>But at the same time, I think they've learned their

0:14:06.040 --> 0:14:09.000
<v Speaker 3>lesson that ultimately they need to be able to stand

0:14:09.080 --> 0:14:11.680
<v Speaker 3>on their own two feet and have more strategic autonomy,

0:14:11.720 --> 0:14:15.440
<v Speaker 3>as the new phrase is going. In one way, this

0:14:15.480 --> 0:14:17.520
<v Speaker 3>should not be a surprise. I mean, Donald Trump is

0:14:17.559 --> 0:14:22.720
<v Speaker 3>someone who is instinctively skeptical of multilateral institutions and the

0:14:22.760 --> 0:14:25.400
<v Speaker 3>European Union. This idea of a collection of twenty seven

0:14:25.440 --> 0:14:28.520
<v Speaker 3>countries is not something he warms to. So I think

0:14:28.680 --> 0:14:31.080
<v Speaker 3>in a way, the European Union needs to accept that.

0:14:31.160 --> 0:14:34.040
<v Speaker 3>Quite frankly, it needs to understand that Donald Trump and

0:14:34.080 --> 0:14:36.920
<v Speaker 3>this White House doesn't really see the EU in the

0:14:36.960 --> 0:14:42.440
<v Speaker 3>same positive terms that American leadership did, particularly during the

0:14:42.480 --> 0:14:45.200
<v Speaker 3>foundation of the European Union after World War Two, as

0:14:45.200 --> 0:14:50.320
<v Speaker 3>a stabilizing force, as a force for economic good in Europe. Instead,

0:14:50.800 --> 0:14:53.160
<v Speaker 3>the Trump administration sees it in a very different way

0:14:53.160 --> 0:14:55.400
<v Speaker 3>as a kind of fading block and a fading power,

0:14:55.480 --> 0:14:57.400
<v Speaker 3>and it prefers to do business elsewhere.

0:14:57.880 --> 0:15:01.320
<v Speaker 2>Suzanne says that what many European leader recognize is that

0:15:01.360 --> 0:15:04.600
<v Speaker 2>there are other benefits to charting a more independent path

0:15:04.640 --> 0:15:08.400
<v Speaker 2>forward beyond protecting Europe itself from the whims of President Trump.

0:15:08.960 --> 0:15:11.120
<v Speaker 3>The reality, if we step back a bit, is that

0:15:11.200 --> 0:15:14.640
<v Speaker 3>Europe as a major economic power has obviously been losing

0:15:14.680 --> 0:15:18.600
<v Speaker 3>ground relative to China in particular, and indeed has the

0:15:18.680 --> 0:15:22.240
<v Speaker 3>United States. But I think the European Union is aware

0:15:22.480 --> 0:15:26.360
<v Speaker 3>that it needs to look beyond the Transatlantic Alliance now

0:15:26.360 --> 0:15:30.080
<v Speaker 3>and it needs to diversify and forge new relationships, be

0:15:30.120 --> 0:15:34.480
<v Speaker 3>it in security, but particularly economically elsewhere. So it's realizing

0:15:34.480 --> 0:15:37.240
<v Speaker 3>that it have been too dependent, for example, on China

0:15:37.320 --> 0:15:40.560
<v Speaker 3>for critical minerals, on China for many of the imports

0:15:40.600 --> 0:15:43.800
<v Speaker 3>that go into a lot of the production in Europe.

0:15:43.880 --> 0:15:46.440
<v Speaker 3>So there has been an awakening I think over the

0:15:46.480 --> 0:15:49.480
<v Speaker 3>last couple of years that the European Union needs to

0:15:49.680 --> 0:15:53.479
<v Speaker 3>strengthen its industrial base, needs to pair back your regulation,

0:15:54.080 --> 0:15:57.360
<v Speaker 3>and needs to ensure that there's a working capital market

0:15:57.400 --> 0:16:00.560
<v Speaker 3>and an investment climate. So it can leverage it's very

0:16:00.680 --> 0:16:02.360
<v Speaker 3>rich single market.

0:16:03.880 --> 0:16:06.320
<v Speaker 2>Last question I want to ask you, I'm curious about

0:16:06.360 --> 0:16:09.640
<v Speaker 2>this idea of European self improvement and looking for silver

0:16:09.760 --> 0:16:13.280
<v Speaker 2>linings here. Europe is often criticized for being too fractious,

0:16:13.280 --> 0:16:15.480
<v Speaker 2>It has many member countries with trouble speaking as one.

0:16:15.480 --> 0:16:19.000
<v Speaker 2>As you mentioned, different countries, different economies. Is a potential

0:16:19.040 --> 0:16:21.920
<v Speaker 2>silver lining for Europe here that European nations have come

0:16:21.960 --> 0:16:25.200
<v Speaker 2>together as a result of this recent fracas in a

0:16:25.200 --> 0:16:28.840
<v Speaker 2>way that has been previously very challenging for this block.

0:16:29.480 --> 0:16:32.640
<v Speaker 3>I mean, it is the case that the European Union

0:16:32.720 --> 0:16:36.360
<v Speaker 3>really only moves forward at a moment of crisis. So

0:16:36.720 --> 0:16:39.000
<v Speaker 3>for example, we saw that during the height of the

0:16:39.000 --> 0:16:42.880
<v Speaker 3>Eurzone crisis. We saw them with Brexit, when Britain decided

0:16:42.960 --> 0:16:45.440
<v Speaker 3>to leave the European Union, a huge rupture for the

0:16:45.440 --> 0:16:47.800
<v Speaker 3>block that a member and a big member at that

0:16:48.160 --> 0:16:50.640
<v Speaker 3>had decided to leave the EU, and that's now ten

0:16:50.720 --> 0:16:55.520
<v Speaker 3>years ago almost Rather than spawn copycat movements across Europe,

0:16:55.640 --> 0:16:58.920
<v Speaker 3>that actually I think served to galvanize the European Union

0:16:58.920 --> 0:17:01.640
<v Speaker 3>and realize a kind of be careful what you wish

0:17:01.680 --> 0:17:04.400
<v Speaker 3>for in some countries that yes, people might complain about

0:17:04.400 --> 0:17:06.160
<v Speaker 3>the EU, but it's better to be in the block

0:17:06.200 --> 0:17:10.240
<v Speaker 3>than outside it. So I think this shock, this rupture

0:17:10.240 --> 0:17:12.840
<v Speaker 3>that's happening now between the United States and the European

0:17:12.960 --> 0:17:17.639
<v Speaker 3>Union may actually serve to generate and some much needed

0:17:17.680 --> 0:17:20.520
<v Speaker 3>action in this area. And I think that's what you're

0:17:20.520 --> 0:17:22.600
<v Speaker 3>going to see a lot of focus on in the

0:17:22.680 --> 0:17:26.400
<v Speaker 3>next year or so in Brussels.

0:17:29.960 --> 0:17:32.639
<v Speaker 2>This is the Big Take from Bloomberg News. I'm David Gerrat.

0:17:32.800 --> 0:17:35.199
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0:17:35.200 --> 0:17:38.320
<v Speaker 2>to all of Bloomberg dot com, subscribe today at Bloomberg

0:17:38.359 --> 0:17:41.880
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0:17:42.080 --> 0:17:44.119
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0:17:44.119 --> 0:17:46.520
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0:17:47.040 --> 0:17:48.879
<v Speaker 2>Thanks for listening. We'll be back tomorrow