Investment Institute

Resilience of the West

  • 27 February 2023 (5 min read)

  • One of the conditions for the transatlantic relationship to thrive is that Europe is convinced the US is not a spent economic force. It’s easier today than 10 or 20 years ago.
  • If PM Sunak manages to push through his deal with the EU on the Northern Irish protocol, for the first time since 2016 the extreme Brexiters will have failed to impose their view on the UK government

This week we want to take a step back from assessing cyclical conditions and second-guessing central bankers to take a look at the transatlantic relationship, spurred by a view “from the outside”, a long essay by Ding Gang, senior editor at China Daily, who highlights how the Ukraine war makes Europe more united and at the same time more reliant on the US, generally pointing at a more resilient than expected “West”.

One of the conditions for Atlanticism to thrive is that Europe convinces itself that the US is not in economic decline. It is easier today than 10 or 20 years ago. Since the 1990s, the US had been increasingly seen as a “spent force” in terms of its capacity to compete with both the rest the “old world” and the emerging nations. GDP continued to grow faster than in Europe, but this came at the price of a rising current account deficit, proof that the US was living “above its means” and had less and less to sell to the rest of the world. Today, even if the US current account deficit is still significant, it is at half of its pre-GFC peak. Sustainability conditions are better achieved while the US can still exert significant traction on European exporters. Meanwhile, foreign holdings of US federal debt have been “westernised”. The share of China has been declining and roughly 60% of foreign holders of treasuries now come from strong allies of the US, linked by free-trade agreements or military treaties.  The “macro-financial West” still exists and this reality, in our view, shapes the EU’s pathway. The solution to the challenge created by the IRA lies more in the EU’s capacity to respond with its own industrial ambition than with confrontation at the WTO.

Brexit has been a thorn in the solidity of the “West” since 2016. We want to be cautious, and we are convinced that the next steps will be very slow to come, but if Prime Minister Sunak manages to push through his deal with the EU on the Northern Irish protocol this week, this will be the first time since the referendum that the extreme Brexiters will have failed to impose their view on the British government. 

Have our latest insights delivered straight to your inbox

Subscribe to updates.

Related Articles


Pushing the Walls


The perfect storm: Deglobalisation’s headwinds


Changing of the Guards


    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.

    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document.

    Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 22 Bishopsgate London EC2N 4BQ

    In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

    Back to top