In less than six months the Trump administration has rewritten the world’s economic and political rule book. And Europe must now find an effective way to react to the policies of a president whose approach to trade is based on disruption by executive decree – almost one each day since his inauguration. Trump also floods the web (he has sent a good 2,500 posts since taking office, especially via his Truth Social network) with an avalanche of contradictory messages. All of this is producing a persistent climate of uncertainty – not unlike the fog of war that accompanies armed conflict.
The current focus of this line of policy action, which is deliberately erratic, is tariffs. In Trump’s eyes these are not just a trade instrument but a multifunctional form of leverage. Tariffs are intended to increase public revenue, protect strategic sectors, and incentivize reindustrialization, and are viewed as having the ability to strengthen national security. This approach is consistent with the idea – strongly rooted in the American administration – that globalization has penalized large swathes of the population and that intervention is necessary to compensate for those losses. According to this view, manufacturing is the symbol of the economy that needs to be rebuilt.
In this scenario, Europe needs to engage in a strategic reflection, an endeavor made even more difficult since increased uncertainty in turn makes it more complex to formulate analyses and anticipate possible decisions. In any case, the United States no longer seem to be acting as the “indispensable nation” around which the international order was organized. Their attitude can be viewed as that of an “extractive superpower” that seeks to maximize its advantages in trade and political relations with its allies and with other countries. For the European Union – founded on cooperation and on a win-win approach, this marks a paradigm shift that is difficult to metabolize.
A vision as clearcut and negative as this one could also be deemed excessive. The demands of the Trump administration can be viewed as an attempt to obtain compensation for and rein in other nations’ free riding on America’s coattails. The idea is that Europe has benefited for too long from unjustified advantages in various fields and must now contribute more. Washington’s line of action can also be seen, even more optimistically, as a proposal for the construction of a new, more stable and balanced, relationship on which to base the future of both sides of the Atlantic.
The way the motives underlying the measures decided by the US administration are interpreted will influence the strategies devised to address them: a mix ranging from pursuing dialogue to a solely defensive approach. Opinions on this topic may differ, but there is no doubt that the first step Europe should take is to set aside its divisions, stop sitting on the fence and think of a lucid and well-structured response. First, it must equip itself to use – rapidly – effective instruments like the anti-coercion mechanism, which provides scope for a timely reaction to aggressive commercial practices, including those of the big digital companies. The negotiating resources which the EU can and should exploit are by no means negligible: suffice it to consider that American imports of semi-finished goods from the EU are double those from the US to Europe.
And yet, in its reaction the EU cannot think solely on a tactical level. The skirmish with America once more highlights the structural weaknesses of the European project. Fragmentation and a tendency to over-regulate act as a brake on industrial competitiveness, which remains a cornerstone of Europe’s social model. They also have negative consequences on the financial sector. The impact of the Basel III regulatory framework for banks, for example, amounts to 15% of the operational costs of the continent’s financial intermediaries, while Washington has decided not to apply them at all for the time being. Nor are the signals encouraging for the markets. America has an ability to attract capital and stimulate innovation which Europe, where the growth in listings continues to be driven primarily by public spending, lacks. To all this must be added Europe’s decision to foster competition by stock markets rather than endeavor to create a major platform for inter-European trading. This is the umpteenth sign of systemic weakness that calls for a policy rethink. Moreover, the EU seems to be built on a regulatory architecture based on the highest common denominator, which often coincides with the most restrictive rules, thus making it difficult for a true and efficient internal market to become established.
In short, in the face of an American power that does not hesitate to use its economic strength as a geopolitical lever, Europe needs to up its game. A change of pace is needed: an autonomous vision based on analytical capacity, assertiveness at the negotiating table, and internal cohesion. Only in this way will the EU succeed in tackling the challenges of a new configuration of global power by playing a role in the eventful and uncertain transformation process of the new international order.