A Looming Shadow of Protectionism: Europe Braces for the Next US President
The upcoming US presidential election has European policymakers on edge, anticipating increased American protectionism regardless of whether Vice President Kamala Harris or former President Donald Trump wins. With polls showing a tight race in key battleground states, the uncertainty surrounding the next administration’s trade policies is fueling anxieties across the Atlantic. The prevailing sentiment among European officials is a shared concern that, irrespective of the victor, a new era of “America First” economic nationalism is inevitable, potentially triggering significant repercussions for transatlantic trade and the global economy.
Key Takeaways: Europe’s Transatlantic Anxiety
- Dead Heat Election: The US presidential race remains incredibly close, leaving Europe uncertain about the future direction of US trade policy.
- “America First” Inevitable: European diplomats predict increased economic nationalism regardless of the winner, leading to concerns about protectionist policies.
- Trade War Fears: Germany’s finance minister warned of potential retaliation if the US initiates a trade war with the EU.
- Massive Trade Relationship at Stake: The US and EU have the world’s largest bilateral trade and investment relationship, valued at over $1.29 trillion in 2021, making the potential for conflict particularly concerning.
- Inflation Reduction Act’s Precedent: The Inflation Reduction Act ($369 billion) already caused friction with European allies due to its perceived protectionist elements.
- Trump’s Return: A Trump presidency is expected to exacerbate protectionist tendencies, potentially including broad tariffs on European goods that could weaken the euro.
- Strategic Preparation: Despite divided opinions, European leaders and the EU Commission are actively preparing for the potential outcomes, focusing on bolstering the EU’s economic resilience and reducing dependence on the US.
The “America First” Predicament: Economic Nationalism Looms
A senior European diplomat, speaking on condition of anonymity, told CNBC, “Whoever wins will be ‘America first’.” This sentiment underscores a deep-seated apprehension among European officials that the next US president, irrespective of party affiliation, will prioritize domestic economic interests. The diplomat further explained that the driving force behind this anticipated shift towards protectionism is the American economy itself. “The main concern for the Americans is the economy, and the answer will have to be more economic nationalism — I don’t agree with it, but I don’t see any way around that,” the diplomat stated. This assessment reflects a prevailing belief that any elected president will deem economic nationalism a necessary response to perceived economic vulnerabilities.
German Concerns and Potential Retaliation
This concern is not confined to anonymous sources. German Finance Minister Christian Lindner explicitly warned of potential European countermeasures should the US engage in protectionist trade practices. Speaking at the IMF annual meetings, Lindner emphasized, “In that case, we need diplomatic efforts to convince whoever enters the White House that it’s not in the best interest of the U.S. to have a trade conflict with [the] European Union.” His statement highlights the serious economic consequences both sides face in a scenario of escalating trade conflict.
Impact on the Transatlantic Trade Relationship
The sheer magnitude of the EU-US economic relationship underscores the severity of the potential disruption. The EU and US boast the world’s largest bilateral trade and investment relationship, exceeding 1.2 trillion euros ($1.29 trillion) in 2021. This figure highlights the interdependence of the two economies and amplifies the economic shocks that protectionist policies implemented by either side would generate.
The Inflation Reduction Act: A Harbinger of Things to Come?
The Biden administration’s Inflation Reduction Act (IRA), a sweeping piece of legislation totaling $369 billion aimed at climate and energy policies, serves as a stark reminder of the friction already present between the US and its European allies. Many European leaders view the IRA as, at least in part, a protectionist measure, highlighting how even policies intended to address domestic challenges can negatively impact transatlantic relations and create resentment among trading partners. The IRA’s potential for trade disputes has already spurred concerns about the longer-term implications of “America First” trade policies. The concerns expressed over the IRA’s potential harm to European interests foreshadow the anxieties felt regarding the broader implications associated with a more protectionist US stance in the upcoming period.
A Divided Europe: Reactions to a Potential Trump Presidency
Within the European Union, opinions regarding a potential second Trump term are far from unanimous. While some, like Hungarian Prime Minister Viktor Orban, have expressed a willingness to celebrate a Trump victory (“several bottles of Champagne”), others express serious apprehension. The disparity in reactions across various EU capitals underscores the diverse national interests and perspectives within the bloc. The highly contested nature of the US Election, even coming down to a handful of votes in critical swing states, has resulted in significant apprehension among numerous EU officials.
Uncertainty And Preparation: EU’s Pragmatic Approach
Despite differing viewpoints, a sense of pragmatic preparation pervades the conversations among EU officials. One EU official, speaking anonymously, told CNBC, “There’s no panic. We are being very pragmatic, but of course we have to prepare for both scenarios.” This underscores the EU’s strategic approach which includes developing “bold initiatives” to bolster its sovereignty and economic resilience – actions intended to mitigate the potential negative impacts of increased US protectionism. In fact, a concerted effort to reduce dependence on both the US and China is already underway, driven by the need to create greater autonomy and stability.
Emphasis on Strategic Autonomy
An October statement from the 27 EU heads of state emphasizes this focus, calling for, “more efforts to enhance the Union’s competitiveness, strengthen its economic resilience, secure its industrial renewal and achieve the full potential of the Single Market.” The statement explicitly underlines the urgent need for decisive action – proactive measures to safeguard Europe’s economic security and ensure its ability to withstand potential disruptions from the outside. This focus on strategic autonomy is a direct response to the uncertainty surrounding the US election and a greater recognition of the importance of reducing economic vulnerability.
Conclusion: Navigating the Uncharted Waters of Transatlantic Relations
The upcoming US presidential election presents significant uncertainty for Europe. While some degree of economic nationalism in the US is anticipated regardless of the outcome, the prospect of a Trump presidency raises particular concerns about a return to aggressively protectionist trade policies. Europeans understand that any new round of “America First” policies will have significant economic repercussions for the entire continent. In response, the EU is proactively preparing for various scenarios, working to strengthen its own economic resilience and lessen its dependence on US trade and investment. The coming months will undoubtedly reveal how well these strategic maneuvering tactics work in mitigating the unpredictable consequences of the next chapter in transatlantic relations.
