ANALYSIS

Trump, an earthquake for Europe

Tariffs, war in Ukraine, the end of US support, the risk of splitting NATO. Why the Old Continent risks being 'the big looser'

3' min read

3' min read

'I don't see how it could get any worse': the words of Jean-Claude Juncker, former Prime Minister of Luxembourg and former President of the EU Commission. Coming from a man who used to talk to Donald Trump at the time of his first term in office and violent Euro-American altercations, this is to be believed.

Yet this time the earthquake for Europe could prove more devastating. First of all because Trump redivivus wants to be a breakthrough president more than ever, but with stronger and more articulate convictions, a clear project, and the means and men to realise it. Thanks to a clear electoral victory that also gave him control of Congress and the Supreme Court, the ganglia of federal power.

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And then America First, the doctrine of protectionism and unilateralism now entrusted to a handful of loyal 'hawks', chosen more for loyalty than competence, in strategic posts in the Administration to carry out the boss's directives.

The end of bipartisan political culture, therefore, and perhaps also of the principle of checks and balances, of the division of powers, which has always been a strong point of US democracy. Four years later, however, Europe appears weaker than ever. The Ukrainian border war, Putin's imperialism hungry for territorial revenge even in Georgia and Moldova, the end of Biden's pro-Atlantic America and the encore of Trump's introverted, isolationist and anti-NATO America. Staggering governments in France and Germany, at the mercy of right-wing and left-wing extremism. Common institutions, Commission and Europarliament, paralysed by the erosion of the old centrist balances shaken by the advance of right-wingers more or less everywhere. In short, a divided Europe, politically at risk of acephaly in Brussels, in the face of the incoming cyclone.

An economy in loss of competitiveness and per capita wealth, tested by the halt to low-cost Russian oil, by Chinese double-dealing, by the caducous certainties about the American shield in NATO. From the German crisis and that of its entire industry cut up by EU over-regulation and the ideological lurch of the Green Deal. On the march towards greener, digital, high-tech and military development, for now without the necessary mega-investments. Unless he decides to act, and soon, to this Europe of high taxation, excessive regulations and suffocating bureaucracy, energy prices that are five times those of the USA, to this Europe that after Covid and the Ukrainian war has increased its pharmaceutical, energy, technological, financial and military dependence on the USA, Trump's arrival risks giving the final blow. Or, on the contrary, the unexpected blow.

What makes her tremble first of all are her recipes for boosting the economy: new cuts in the tax burden, with corporate tax at 15%, an assault on Big Government to convert it to efficiency under the leadership of Elon Musk, fracking with a free hand in the energy sector, a stop to Biden's net-zero economy. Generalised tariffs of 10-20% but for China at 60. For the Union it will be a 25% collapse in US exports and a 157 billion dollar trade surplus in 2023, with the aggravating factor that the US tariffs on China will divert products and surpluses to the EU market. All this while Europe will be asked not only to make a greater commitment to defence, 3% of GDP no longer 2, but a higher contribution to aid to Ukraine in the event of Trump's disengagement and eventual peace agreements with Russia without solid security guarantees for Kiev.

However, it is the growing economic and industrial asymmetries between Europe and the United States that are the greatest danger lurking. Biden's IRA, the Inflation Reduction Act, has already triggered the flight from the Union of a good number of companies, start-ups and talents attracted by easy aid and fewer rules for doing business. And already today 300 billion a year of EU savings go the way of the US. Let us imagine the haemorrhaging of relocations if Trump implements his counter-revolution in the form of lower taxes and massive deregulation even for Big Tech monopolies.

For the European industry, which is unable to create its own champions because of the rigours of the EU antitrust and which today pays dearly, car but not only, the rules of the green deal, punitive for itself but not for non-EU competitors, would become an irresistible lure. So much for regaining competitiveness. Unless Trump's lashings force the Union to make a rapid course correction.

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