The Transatlantic Tech Clash: Will Europe “De-Risk” from the United States?

The tit-for-tat trade escalation between the United States and China has dominated news cycles. In the backdrop of rising U.S.-China tensions is another—and potentially just as profound—change occurring in the U.S.-EU relationship. The Europeans may increasingly distrust U.S. technology and may focus on “de-risking” not just from China but from the United States as well.

The Trump administration’s aggressive attacks on European technology regulations and the cutoff of intelligence-sharing and weapons deliveries to Ukraine have led to fears in Europe that the United States could do something similar to it. Europe has suddenly become full of rumors that the United States could invoke a “kill switch” that would disable core military systems, including the Lockheed Martin F-35 fighter jet, or cut off intelligence-sharing and military sales to the bloc. Fears continue to mount in Europe that the United States could weaponize its technological dependencies, particularly if trade tensions spill over into the digital and tech domains. The role of digital connectivity in advancing national security priorities, waging war, and shaping the global information environment through large language models (LLMs) and very large online platforms (VLOPs) has thus moved to the forefront of geopolitics.

U.S. providers account for two-thirds of the EU cloud services. It is possible that the United States could leverage this dependency for geopolitical ends. For example, the United States could ask cloud service providers to cut Denmark’s access in a confrontation over Greenland or force the Netherlands to restrict all semiconductor tooling exports to China through a mix of the Foreign Direct Product Rule (FDPR) and financial sanctions. Signaling an intention to expand its use of statecraft tools to target European partners could prompt an exodus of European consumers from U.S. technology. Underscoring the seriousness of the issue, in late April 2025, Microsoft President Brad Smith announced new “European digital commitments,” pledging that, “in the unlikely event we are ever ordered by any government anywhere in the world to suspend or cease cloud operations in Europe,” Microsoft would pursue litigation, store backup data in Switzerland, and provide EU access to relevant data and code.

Overall, the Trump administration is increasingly coupling what have been disparate policy areas by tying Europe’s military dependency to trade and technology disputes. This represents a radical departure in transatlantic relations and has shocked Europeans. It has been assumed by many in the United States, especially in the technology sector, that Europe will have to comply with U.S. demands given their need for US protection. Yet the Trump administration is also presently planning, and will soon announce, dramatic troop reductions in Europe. European leaders are already questioning the reliability of the United States and are beginning to prepare for a world without U.S. military support.

The Trump administration, even after troop withdrawals, still has leverage, and may seek to connect the national security trade tool kit of export controls and sanctions with more traditional trade tools like tariffs and other remedies. This approach has surfaced in U.S. attempts to tie EU tariff relief to reduced EU fines on U.S. digital service providers, as well as in a watering down of hallmark EU legislation such as the Digital Services Act (DSA) and Digital Markets Act (DMA). The United States has even made the explicit request of eliminating the “Google Tax” that some EU countries apply to digital companies, most of which are American. The medium- and long-term effects of this approach will be to expedite Chinese and European efforts to indigenize technology and de-risk from the United States. However, de-risking will be challenging and costly in the short term, particularly given U.S. dominance in critical technologies such as cloud, in addition to the United States’ robust extraterritorial legal tool kit. In the transatlantic context, trade tensions risk bleeding into the technology domain.

Digital Trade

Debates over digital governance have long existed in the transatlantic context. The past decade of policy debates has focused largely on the European Union’s precautionary approach, which regulates technologies before launch—a philosophy in stark contrast with the U.S. “move fast and break things” ethos. These differing approaches have come into greater focus, leading the European Union to consider the feasibility of abandoning U.S. tech altogether. European reluctance to rely on U.S. digital technology is not new. It goes back at least to the 2013 Snowden revelations about U.S. bulk electronic surveillance of allies and partners. Current geopolitical conditions mean that governments on both sides of the Atlantic increasingly view the digital economy and related security risks as an extension of national power.

It is a common refrain around Washington, D.C., that governments need to be more forward in doing something “on digital.” This typically means trade in services, rather than commodities. Digital trade encompasses e-commerce, digital products like e-books or software, platforms that connect people and companies, and data flows that underpin the cross-border transfer of information, including those related to financial exchange. In 2023, U.S.-EU digital services trade reached $848 billion (€746 billion), with a U.S. surplus of nearly $123 billion in services trade in 2023. Despite the “intangible” nature of digital trade, it relies on trade in physical commodities. It depends, for example, on a highly complex web of copper wires used in data centers, chips that power data, the electrical grid, and other inputs that comprise Internet of Things (IoT) devices that companies and consumers use in everyday life.

That so much of digital trade is underpinned by physical constructs also means that digital trade is already implicated in statecraft policies that seek to exact geopolitical objectives through access to or denial of advanced technologies. For example, subsea cables made of fiberoptic strands facilitate 99 percent of international data flows. These tubes—the foundational scaffolding of the Internet—have recently been cut by rivals in places like the Baltic Sea and Taiwan Strait. Between 2024 and 2025, at least 11 Baltic cables were cut, leading NATO to reevaluate its risk exposure.

There is growing concern about the ability of governments to weaponize digital services as a lever of additional national power, similar to how Russia weaponized European gas supplies following the full-scale invasion of Ukraine in 2022. A complicating factor is just how intertwined transatlantic tech stacks are. For example, a European business doing business with another European company has a high likelihood that at least one of the companies is running on a U.S. company’s digital infrastructure. The same is true for governments, which often rely on U.S. cloud service providers for basic work needs.

Recent discussions have focused primarily on how the United States could use its tech stack as leverage against Europe. Recent statements suggest that cloud services would run for at least six months after a kill switch had been triggered. Geostrategist Ansgar Baums has suggested “that such a time buffer might become part of a customer reinsurance package of U.S. hyperscalers” and that six months can provide additional “space for diplomacy” to occur.

EU Options

The European Union has begun to contemplate ways to de-risk from U.S. tech. The new European Commission has a “technology sovereignty” commissioner who covers the digital and frontier technology portfolio, among other issues. In March, the Dutch parliament passed a series of measures calling on the Dutch government to switch away from U.S. software and to create a cloud under Dutch control.

The European Union also has significant leverage it could use to respond, including throughout the digital economy. The codependence between the two parties is less asymmetric than first meets the eye. The United States also has significant dependencies on European tech. A total or even partial decoupling would prove damaging. Parallels between physical and nonphysical trade offer lessons about dependencies and weaponization.

Beyond the tech domain, the European Union possesses a wide array of tools it could deploy in retaliation if the United States were to engage in aggressive use of technological interdependence. In addition to the previously mentioned DSA and DMA, Europeans have been developing several new instruments of economic statecraft in recent years, ranging from retaliatory tariffs to restrictions on data transfers or investment screening. Perhaps the most consequential of these, though never used before, is the Anti-Coercion Instrument (ACI). If deployed, the ACI would enable the European Union to respond to any action it perceives as coercion, whether by the United States or another country, in whatever way it deems appropriate. Potential measures could range from imposing heavy taxes on U.S. tech companies to targeting energy imports or even introducing restrictions on U.S. tourists (Gehrke has outlined the full range of available options).

Its activation, however, is not automatic. It requires a proposal from the European Commission, which must then be approved by the European Council with a qualified majority—that is, at least 55 percent of member states (currently 15 out of 27), representing at least 65 percent of the EU population. Nevertheless, given the current state of transatlantic relations, it is likely to proceed if the commission chooses to trigger it.

Questions about U.S. reliability are also prompting massive investment in the defense sector. In March, European Commission President Ursula von der Leyen made a proposal for an $866 billion plan to “ReArm Europe.” The German parliament has likewise approved landmark spending reforms, exempting defense spending above 1 percent of GDP from the country’s long-standing “debt brake.” This could unlock billions of dollars of new funding for European re-armament. Normally, U.S. defense companies would reap the benefits of this increase since Europe has an open defense market and the United States has become the top external supplier to Europe.

This has left European militaries highly dependent on U.S. military technology. Even European-made weapons systems, such as Sweden’s Saab Gripen fighter jet, has extensive U.S.-controlled technology. Thus, while perhaps unlikely, the United States has the ability to stop approving licenses for U.S.-controlled military technology to European countries. The United States could also reject European requests to transfer weapons with U.S. content to Ukraine. Europe has few points of leverage to hit back at the United States, since the U.S. defense market is largely closed to European companies, and those European defense companies that do business in the United States have to incorporate as de facto U.S. companies. One point of leverage is the F-35, as Europeans produce parts and components for the aircraft. Another is the potential total loss of the European market to U.S. defense companies. But the United States has far more leverage over Europe. This has prompted Europeans to focus on buying European. The European country best placed to fill the defense technology gap left by the United States is France, as its defense industry is the most “ITAR-free” (meaning it contains no U.S.-controlled military content) of the European defense sectors.

The European Union has been relatively slow to develop core digital infrastructure. This will be an integral ingredient in geostrategic offense and defense moving forward. Arguably the most consequential part of the digital revolution is the shift toward hyperscale infrastructure—provided mainly via the cloud—that companies are using to build new business models. Maintaining a strategically autonomous tech ecosystem, for example, requires an AI-enabled biotech startup to access data centers at low energy input costs and with minimal other restrictions. In April 2025, the European Union announced its AI Continent strategy, which aims to build infrastructure to support hyperscalers and an advanced AI economy. Sourcing parts, components, and labor will remain challenging, in addition to institutional financing problems that arise from Europe’s lack of a capital markets or fiscal union. In the short term, political disagreements, a low-trust environment, and the application of tariffs on key inputs to finished goods will slow down progress to more closely intertwine digital economies.

Another problem for Europe is that the market dynamics are fundamentally different than in the United States. If the European Union wants to foster a more competitive digital ecosystem, it needs to be willing to undertake basic reforms. This includes creating a capital markets union, as the European Union lacks deep pools of capital capable of funding risky bets required to compete. Capital market reforms can enable deeper pools of risk capital to fund digital startups and enable companies that get off to a strong start in Europe to remain and grow into globally significant companies there, rather than moving to New York, California, or even London. The deficiencies of bankruptcy laws in Europe that would incentivize the ability to start anew have discouraged a generation of entrepreneurs from taking a high-risk approach to technology indigenization.

Next Steps

Washington is currently experiencing how challenging trade negotiations can be, even when relegated to trade in goods. Blurring the lines between digital, physical, and advanced technologies—and layering these negotiations with a more robust statecraft tool kit—risks cascading effects that would expose hidden vulnerabilities throughout supply chains. This would also significantly increase costs and quality on both sides of the Atlantic. In particular, invoking a “kill switch” as a threat would represent an escalation far bigger than tariffs, exceeding most existing threat scenarios. It would also invite the European creation of a new suite of statecraft tools, perhaps including steps to create an EU-wide entity list equivalent. U.S. policymakers should not underestimate the European Union and its ability to pursue a rapid, albeit expensive, course of de-risking from U.S. technology.

A lasting realignment would also create an enduring split in the tech stack that could complicate the ability of U.S. firms to provide services, affecting everything from financial service providers and rideshare companies to agentic AI firms and defense primes. As political scientists Abraham Newman and Henry Farrell recently wrote in Foreign Affairs, a digital decoupling “could also spell the end of today’s open Internet.” The best course of action is to find immediate ways to reassure partners and to restore confidence in the transatlantic relationship.

Emily Benson is a senior associate (non-resident) with the Europe, Russia, and Eurasia Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Max Bergmann is director of the Europe, Russia, and Eurasia Program and Stuart Center in Euro-Atlantic and Northern European Studies at CSIS. Federico Steinberg is a visiting fellow with the Europe, Russia, and Eurasia Program at CSIS.