This a joint CFR analysis assessing the geopolitical effects of the Trump administration’s tariffs policy on traditional U.S. alliances with Canada, the European Union, Japan, and Australia and New Zealand.
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Meeting in Hiroshima, Japan, in May 2023, heads of government from the Group of Seven (G7) advanced democracies declared that they were “more united than ever in our determination to meet the global challenges of this moment.” The leaders of the United States, Europe, Japan, and Canada, joined by counterparts from Australia, South Korea, and other partners, did not agree on everything—not least trade policy—but still got behind an array of cooperative initiatives on Ukraine, non-proliferation, economic security, and other shared concerns.
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Just two years later, the sense of common purpose that prevailed at Hiroshima seems part of a misty past. Today, allies are scrambling to pin down deals with the Trump administration to avoid higher tariffs and restore some stability and predictability to their relationships with the United States. Efforts to “meet the global challenges of this moment” have been subordinated to meeting the demands of bilateral trade diplomacy.
Most commentary on U.S. trade policy over the past eight months has understandably been focused on the daily gyrations of tariffs and dealmaking and their economic, legal, and political implications. Less attention has been paid to the knock-on effects of the tariff drama on other important aspects of U.S. relations with its closest allies. CFR convened four of its regional and country experts to explore the other geopolitical implications of the Trump administration’s trade policies on some of the United States’ closest allies—Canada, Europe, Japan, Australia, and New Zealand.
Canada Lays the Groundwork to Pivot Away From the United States
Edward Alden is senior fellow at the Council on Foreign Relations, specializing in U.S. economic competitiveness, trade, and immigration policy.
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While Trump’s tariffs and “America First” unilateralism are reshaping relationships around the world, nowhere has the effect been more profound than in Canada. The country’s response so far has been energetic and ambitious. But as U.S. tariffs start to bite—Canada’s economy shrunk by 1.6 percent in the second quarter of 2025 largely due to falling exports, and its unemployment rate ticked above 7 percent in August—it is clear the hurdles are daunting.
The fallout has forced Canada to develop a new plan to face down an antagonistic United States. It is built on three pillars: unifying its economy domestically, bolstering military spending, and seeking deeper ties with European allies. Each involves a radical break with the past.
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Canada’s strategic realignment will require time to gradually reduce its economic and military dependence on the United States and foster new relationships in Europe and Asia. Slower economic growth is likely for several years at least. Carney has so far had strong public support in his efforts to deal with what he called last week “not a transition [but] a rupture” in Canada’s relationship with the United States—but he may not get all the time he needs.
Read Edward Alden’s full assessment of Canada’s push to realign its geopolitical alliances and reimagine its economy.
Will the EU’s One-sided U.S. Trade Deal Lead to an Awakening?
Matthias Matthijs is senior fellow for Europe at the Council on Foreign Relations.
When European Commission President Ursula von der Leyen met with U.S. President Donald Trump at his Turnberry golf resort in Scotland in late July, the outcome was an imperfect and one-sided trade deal. Yet the Turnberry deal might prove to be the beginning of Europe’s strategic awakening. In the short term, it does entrench Europe’s dependence on the United States—especially in energy and defense—but this forced dependence is also setting in motion countervailing dynamics that will reshape Europe’s geopolitical posture in three critical areas in the medium and long term.
Trade diversification. Brussels is accelerating trade talks with Canada, Japan, and South Korea, while the free trade agreement with Mercosur—the South American trade bloc consisting of Argentina, Bolivia, Brazil, Paraguay, and Uruguay—would lead to the largest free trading area in the world, with the ratification process now officially underway.
Defense spending. The Turnberry deal has also served to bolster arguments for greater investment in European defense that were set in motion in the spring of 2025. If Trump’s tariff threats could be leveraged in exchange for vague promises of U.S. security guarantees, then Europe must (and will) reduce its reliance on U.S. military power in the medium term.
Energy transition. European energy policy is currently undergoing a structural reevaluation. While the EU’s commitment to U.S. liquid natural gas locks in short-term dependence, the political lesson has been internalized: Europe cannot afford to swap reliance on Russian pipelines for reliance on U.S. tankers. The logical response will be a doubling down on renewable energy.
Read Matthias Matthijs’s full assessment of Europe’s geopolitical maneuvers in response to Trump’s trade policies and Turnberry.
Tariff Woes Raise Political and Security Concerns in Japan
Sheila A. Smith is John E. Merow senior fellow for Asia-Pacific studies at the Council on Foreign Relations.
Early signs from the second Trump administration suggest a tougher road ahead for even the most supportive U.S. allies in Asia. Its forceful disruption of international trade has teetered on the edge of affecting allied security cooperation, as the president occasionally states his displeasure at the treaty with Japan. Yet the most concerning aspect of this new U.S. foreign policy approach is its abandonment of the ideas that underpinned the postwar international order. If Washington no longer advocates for the economic world it helped build, will it also abandon the global security commitments that kept its allies and adversaries in check?
Several aspects of this early trade tumult have implications for U.S. security ties in Asia. First, unpredictability of decision making—including the on-again, off-again hammer of high tariffs—makes alliance management difficult. Second, strong corporate ties contribute to the strength of U.S. Asian alliances but recent confusion over tariff policy will likely weaken business confidence and perhaps even investment in the United States. Third, U.S. requests for Japan to raise defense spending and Host Nation Support are likely to invite ire among Japanese who see their economy as the primary priority.
Read Sheila Smith’s full assessment of how current U.S. trade policy is affecting alliances in Asia.
Trump Tariffs on Australia and New Zealand Risk U.S. Pacific Strategy
Joshua Kurlantzick is senior fellow for Southeast Asia and South Asia at the Council on Foreign Relations.
Australia and to a lesser extent New Zealand are central to U.S. defense strategy in the Western Pacific. U.S. strategy, which has remained consistent through the Presidents Joe Biden and Donald Trump administrations, aims to deter China’s expanding reach into the airspace and waters of the Pacific. This relies on building a network of partners in the region that allow operational access, possess sophisticated weapons, and are sites the Pentagon can count on to help deploy U.S. planes, ships, or ground forces in the event of a conflict.
Now, however, the Trump administration’s trade policy toward Canberra and Wellington has put defense ties with the two normally stalwart allies at risk. Both countries, where the U.S. has become extremely unpopular, are now openly considering foreign policy shifts away from Washington.
In addition to the tariffs’ economic effects, U.S. trade policy is threatening other key aspects of relations with Australia and New Zealand: high-level “Five Eyes” intelligence sharing; popular support among policymakers and the general publics for U.S. ties and a rules-based global order led by the United States; and joint efforts to prevent Chinese influence from proliferating within democracies as well as in Pacific Island states that have become essential in the case of a potential Pacific conflict.
Read Joshua Kurlantzick’s full assessment of how Australia’s and New Zealand’s rising frustration with U.S. trade policy could put U.S. defense and intelligence ties with these states at risk.
This work represents the views and opinions solely of the authors. The Council on Foreign Relations is an independent, nonpartisan membership organization, think tank, and publisher, and takes no institutional positions on matters of policy