Overview
Thomas Goldstein is an analyst with Steptoe’s Global Strategic Engagement Team with a focus on US foreign policy, European geopolitics, and the Western Balkans. Thomas provides forward-looking analysis on domestic and geopolitical developments for international clients, providing assessments and key takeaways to guide strategic decisions and stakeholder engagement plans. Thomas speaks and researches in German.
Thomas sat down with Ian Cameron, the team’s other lead Europe analyst, to discuss current developments in transatlantic relations.
The first year and a half or so of President Trump’s second term has witnessed a lot of change for the transatlantic relationship. In your opinion, what are the most important trends to watch going forward? What risk areas should international businesses be tracking closely?
The driving force in transatlantic relations is a new division of labor in defense. As I wrote in March, the Americans dub this “NATO 3.0,” in which the Europeans take more responsibility for the management and conventional operations of the alliance, while the Americans remain as a backstop on strategic enablers like space-based intelligence, at least for now. However, this will spill over into economic dimensions of the relationship too. The EU is increasingly implementing “Buy European” approaches, for both procurement of defense items but also renewable energy systems, tech services, and industrial inputs like steel. Thus, defense policy is integrating itself with industrial policy that had predated the Trump administration. In the long-term, the US must reckon with potential non-alignment with rearmed EU powers like Germany, which is poised to become a regional hegemon due to its unmatched fiscal and industrial capacity.
I am also tracking potential long-term divergence among the G7 bloc. Under the Trump administration, the US has taken its own approach on Russian energy sanctions, direct military and financial assistance to Ukraine, AI policy, and Middle East regional politics. Even if the next US administration seeks to coordinate more directly with the EU, UK and Canada on these issues, the US loses skin in the game through the rebalanced defense relationship. At best, that means more leverage for European players; at worst, the G7 becomes a less useful coordinating bloc in a more dynamic international system.
EU enlargement is gaining momentum, and there are several concepts for how it could move forward. Which policy for enlargement is the most realistic?
I think it is better to view enlargement momentum as three policy shifts coming together. First, the EU has experienced a geopolitical awakening that Ukraine must be admitted into the bloc as part of a sustainable postwar peace. The US aligned on this during mediation between Kyiv and Moscow. But Ukraine is not ready to be swiftly admitted—institutionally or economically—and member states have rejected “reverse enlargement,” where Ukraine is admitted as reforms are ongoing. So the process has to change, and it must change systematically to apply to all candidates.
Second, more directly to your question, influential players like Germany and France have aligned on allowing candidates to join EU initiatives as they complete relevant reforms, before they become full members. The idea is to unlock benefits quicker and institutionally “lock in” candidate reforms. I wrote a deep dive on this in June.
Third, there is an understanding that the EU must internally reform to prepare for more members. This mostly applies to institutional decision-making in a union of potentially 30-plus members, but also how the EU budget gets redistributed. This is where things get controversial. The European Commission is slated to reveal its proposals in September, but it has delayed them before due to scrutiny. One idea may be to limit individual vetoes in some foreign policy decision-making, such as opening new chapters in candidates’ EU accession reform negotiations, or adding individual entities to established sanctions frameworks. Another may be to limit the vetoes of new members for a few years or incorporate “safeguards” to strip veto rights if new members backslide on their reforms. I do not see EU members surrendering foreign policy vetoes entirely, but with enough institutional momentum, I think the bloc can find a solution.
In sum, EU enlargement is not just about new opportunities with European integration. It changes the political chessboard through new players and possibly new decision-making procedures.
Technology policy is a major point of friction between Brussels and Washington. How do you see the EU balancing the relationship with the US vis-à-vis its prioritization of digital sovereignty, and is there potential for this to turn into a flashpoint in the relationship?
The EU is betting that digital tensions can be managed and compartmentalized from broader transatlantic relations. All signals suggest that the European Commission is moving full steam ahead on its “tech sovereignty” agenda, which is a broad set of industrial policies to support the bloc’s AI stack (I wrote about this in May). The Commission continues to enforce its Digital Services Act with new actions against American and Chinese companies in July, plus it will propose a new social media ban for children under 13 soon (likely September).
To be clear, each enforcement action has shaken the boat with the US. But Washington has never escalated its tech discontent beyond rhetoric because it has more to lose. Digital services represent a huge trade surplus for the US and underpin much of the modern economy. This is why the US and EU have routinely struck data transfer agreements that respect the EU’s more stringent rules. This is also why the US and EU agreed to a Turnberry trade truce without addressing digital frictions. Indirect tech tensions, while adverse for the business environment, are unlikely to become a major boiling point and can co-exist with narrow sectoral cooperation, such as on critical minerals security.
Stepwise analysts pitch their own topics based on what is interesting to them and what is timely for readers. What’s a topic you’ve been following and wanting to write about, but haven’t had a chance to yet?
I am eagerly anticipating regional elections in the eastern German federal states of Berlin, Saxony-Anhalt and Mecklenburg-Western Pomerania in September 2026. In the latter two, the populist right Alternative for Germany is polling first. These elections will follow earlier regional polls in two western German states, offering the clearest picture of where German politics stands just over a year into Friedrich Merz’s chancellorship. These regional elections could also affect the internal party politics of the ruling center-right CDU/CSU, which has become increasingly at odds with Merz’s leadership. While not necessarily a likely outcome, Merz must contend with a “Starmer” scenario, in which a string of poor results sparks a party revolt leading to his ouster.
Another major election next year is France’s presidential election in April 2027. That is still a bit distant in the future, but this may be one of the most consequential polls in Europe because of the prospect of electing either the populist right candidate, Marine Le Pen, or the populist left candidate, Jean-Luc Mélenchon. France is a two-round system, meaning that both the populist candidates could become the only options for France’s voters if they lead the first round. Either candidate could dramatically alter France’s relationship with NATO and the EU.
