The results of the presidential elections in the United States have always conditioned world balances, and not only in political spheres. The second Trump presidency may be remembered as a protectionist turning point of major consequence for the entire planet. Nevertheless, the scenario in the US is not the only one influencing the success of certain economic policies; the international framework will also be decisive in revealing their impact and outcome.
Today’s world is witnessing two conflicts that, in a certain sense, could be considered “world wars”: powers such as Russia, China and India – and to a somewhat lesser extent Brazil, Turkey and Saudi Arabia – each with its own interests and aims, are attempting to erect a set of international institutions alternative to those of the West that have monopolized the global panorama of recent decades. At the same time, global climate change has amped up the urgency of transitioning to a production/consumption process less centered on fossil fuels.
Donald Trump’s promises have essentially two aims: a substantial increase in protectionism (and therefore customs barriers to imports into the United States); and tax cuts and a radical reduction in government spending.
Underlying Trump’s success has been the rise of economic nationalism within American public opinion. Political formulas based on prejudice and mistrust have taken the upper hand. The new administration will be using trade tariffs precisely in an effort to roll back the economic-industrial stimulus that has distinguished Joe Biden’s administration.
Imposing tariffs is a presidential prerogative; according to Trump and his allies, raising the price of foreign imports should create the indirect conditions for making American products cheaper, even in the absence of direct stimuli. The problem is that this policy instrument will also have the effect of increasing the cost of some internationally-sourced consumer goods on which the US is highly dependent.
It remains to be seen what new barriers will be erected, who they will target, and how high they will aim. The overall consequences also depend on whether tariffs specifically single out Chinese or European industries or else are applied universally. Indeed, one of the consequences of higher tariffs is the possibility of ruining relations with allies, such as Canada and Mexico, but also Germany and Italy – Europe’s top exporters – or Japan and South Korea.
This is the crux of the problem, precisely because the goal of the tariffs proposed by Trump is to reset the American trade balance and rebuild the strength and independence of an industry that has been drastically weakened over recent decades. Yet, international manufacturing systems are so closely interconnected by now that a block on Chinese and European imports could paradoxically damage all of American industry, not least by depriving it of critical manufacturing components.
Prices are another unknown. Inflation has been one of the main causes of the American public’s dissatisfaction and was a key factor in the Democrats’ defeat. New price increases would be felt in Europe too, since export companies will be selling less and thus be forced to cover their losses in other ways, either by raising prices or laying off workers. As a major industrial power and exporter, Italy will take a direct hit.
Export industries might choose to pursue new markets or trade agreements with emerging countries in Asia or Africa. Such a scenario is realistic for Europe, given current economic-political uncertainties and fragilities, as well as a structural lack of energy resources and essential raw materials.
During his electoral campaign, Trump was very clear on another of his intentions: to increase the American production of oil and gas by encouraging further exploration and the installation of new wells. Thanks to new extraction technologies, the United States was able to achieve energy independence more than a decade ago. With the Ukraine war having cut off much of the supplies coming from Russia to Europe, the United States now has a new market for its fossil fuels, but one more costly compared with Russia’s due to obligatory liquefaction and regassification processes.
A further increase in American production would therefore allow for lower gas and oil prices, which could offer Europe a series of advantages, as well as provide significant geopolitical assurances.
The negative effects for the US, however, would include its detachment from energy transition processes and an industrial value chain already almost completely dominated by China. If there were to be important technological advancements in alternative energy sources then, America could find itself stuck with an inadequate and obsolete fuel industry.
Europe can count on few certainties in the near future: without a doubt, the Union needs to make important choices at both community and individual national levels. Such a step will be crucial in interfacing with American policies in a world that will continue to change, regardless of Washington’s preferences.