Trump’s victory could give Europe the wake-up call it needs
3 min read
If we believe that Donald Trump really means what he said during the election campaign, we may be entering a period of American protectionism and abandonment of democratic allies. The stakes on this are so high that we must take it seriously – but should we take it literally?
On trade, Trump says he intends to place tariffs of 20 per cent on all imports into the US and up to 60 per cent on imports from China. The impact would be enormous. These are 20th-century tariffs imposed on a 21st-century world economy. With supply chains for the manufacture of single products stretching across many nations, the level of disruption to trade would create a massive economic shock.
Trump sees himself as a dealmaker and views negotiations as zero-sum. Any nation that has a trade surplus with the US is seen as taking advantage. The United Kingdom is one such nation and so at risk of being on the losing side of his trade war.
Global trade disruption will hurt everyone, even if we aren’t the immediate focus of Trump’s ire
Last time he embarked on a trade war with China, he was satiated when China promised to buy more US goods. Then, Trump was restrained by Congress and the Republican establishment. This time, the president will be utterly dominant. His proposed appointees are selected precisely because they will not challenge him. His trade advisers are of the unorthodox view that the cost of tariffs won’t eat into the living standards of domestic consumers but rather will come from the profit margins of foreign companies.
If Trump’s tough talk on tariffs is negotiating bluff, then the way to deal with the self-styled dealmaker will be negotiation. In 2018 when he slapped tariffs on goods, there was an intelligent response: countering with selective measures designed to hurt exports of symbolic goods from politically important states.
Incumbents all over the world have been losing elections due to inflation. Tariffs and counter tariffs would dramatically worsen the cost of living for American voters. However, Trump no longer needs to worry about re-election. He is surrounded by tech bros who do not fear disruption. The second Trump presidency may shift from deal-making in order to secure access to markets towards a an ideologically driven drive to reduce imports and end offshoring.
If the President-elect is serious, it will be a global shock requiring a global response. The UK and other nations will naturally wish to negotiate a less damaging position in bilateral talks with the US, but global trade disruption will hurt everyone, even if we aren’t the immediate focus of Trump’s ire. Given so many of our allies also have a trade surplus with the US, there is an opportunity for a multilateral strategy that avoids like-for-like tariffs that would only double the amount of trade disruption.
On security, we face similar questions. Are we experiencing a repeat of Trump’s tactics last time: threatening to leave Nato as a way of securing commitments to greater defence spending by European allies? Again, if this is a negotiating strategy, Europe can – and should – respond by increasing military spending to a level where it is clear they neither want nor need to shelter under the protection of American taxpayers.
If Trump does walk away from Ukraine, it would be disastrous in the short term for democracy and security around the world. However, to borrow from President Emmanuel Macron, some tough love that forced the herbivores of Europe to acknowledge they now live in a carnivorous world would be the wake-up call the continent needs.
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