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Analysts warn that a second term for Donald Trump could severely disrupt the global economic order and could trigger an economically disastrous trade war between the United States and the European Union.
Trump is locked up Fierce campaign Along with Democratic candidate and current Vice President Kamala Harris, Trump has pledged to impose tariffs of at least 60% on Chinese goods and 10% on imports from the rest of the world if re-elected as US President.
The proposals have stoked concerns that a second Trump term could be even more protectionist than his first, when he imposed tariffs on a range of goods including washing machines, solar panels, aluminum and steel.
“Trump advocates an aggressive ‘America First’ policy and does not care much about building an open transatlantic economic system,” George Rickless, deputy director of the European Policy Center, told European Events.
“Under Trump’s leadership, we are likely to see an escalated trade and investment war.”
Rickless added that a second term for Trump would “cause and bring about huge economic efficiency losses.”
“The cost of the green transition will become more expensive, inflationary pressures are likely to rise sharply again, and unemployment will rise as countries fall into protectionism,” he said.
Alicia Garcia-Herrero, a senior fellow at EU policy think tank Bruegel, said Trump’s choice of Ohio Senator J.D. Vance as his running mate shows that his protectionist stance is as strong or even stronger than during his presidency from 2017 to 2021.
As a staunch critic of free trade, Vance Repeatedly emphasized “Broad-based tariffs are needed to protect American industries from global competition, particularly on goods from China.”
“If we ever wondered whether Trump would become a different Trump, a more attractive Trump to Europe, for whatever reason, I think now we know,” García-Herrero told EuroEvent.
García-Herrero noted that EU leaders may try to offset the isolationism of Trump and Vance by taking “crazy action” to forge deeper economic and research partnerships with other “like-minded partners” such as the United Kingdom, Canada, Australia, South Korea and Japan.
At the same time, Rickles noted that Trump’s re-election in November would cause China to “compete more vigorously for other markets and for influence and power in the world.”
“It’s going to be a fight between the BRICS countries: Brazil, India, South Africa and so on. It’s going to be a fight between the resource-rich countries and the global South,” he said.
He added: “I think the world is probably going to break apart much faster than we expect.”
The risks of a US-EU trade war are “asymmetric”
Analysts point out that the tariff measures proposed by Trump will directly affect the European economy in at least two key aspects.
They explained that, first, imposing a 60% tariff on Chinese imports could result in many goods originally destined for the US market being diverted and “dumped” in Europe, forcing Europe to also introduce protectionist measures.
“I think European businesses will flock to capitals and Brussels and say, ‘You have to save us – through subsidies and trade protection,’ ” Mr. Rickless said.
From this perspective, the European Commission Recent Decisions He said the tariffs on Chinese-made electric vehicles were just a precursor to future actions.
Sander Toldor, chief economist at the Center for European Reform, noted that Trump’s 10% tariff on global goods will particularly affect Germany, the EU’s largest economy, which is already suffering from the double blow of weak demand and increased competition from China.
“A 10 percent tariff is not very high, but it will certainly hurt German exports at a time when German exports are struggling,” he said.
Tordoir explains, The United States recently surpassed China As Germany’s largest trading partner, and with the EU’s overall trade surplus with the United States currently exceeding 150 billion euros, the risk of a US-EU trade war is “asymmetric.”
He also noted that given China’s growing tendency to hinder foreign companies from entering its economy, U.S. protectionism will only exacerbate Germany’s difficulties in finding suitable export markets.
He added: “If I were in charge of economic policy in Berlin, I would be very worried about this because if the two largest economies in the world no longer offer that market access, then it’s really not that obvious where you can sell German capital goods.”
Leveraging America’s Security Leadership
Some analysts also point out that Trump may try to use the United States’ position as Europe’s security guarantor to influence the continent’s trade policy.
Tobias Gehrke, senior policy fellow at the European Council on Foreign Relations (ECFR), told Euractiv that Trump may prefer to use “sticks” rather than “carrots” to encourage European companies to reduce their reliance on China.
“Right now, the U.S. offers a lot of incentives for businesses, especially the Inflation Reduction Act, which basically says: ‘You cut off China, but in return you get money,'” he said, referring to the U.S. offering businesses Over $1 trillion Adopt tax credits and subsidies to encourage domestic green manufacturing.
“It’s a pretty expensive agenda. I think you could well imagine a Republican administration turning it around and saying, ‘Unless you act a certain way and change your supply chain, you’re going to have restricted access to the U.S. market.’”
Trump’s policies could also prompt Chinese efforts to “drive a wedge” between the EU and the United States, encouraging Europe to seek more economic cooperation with Beijing rather than Washington, Gehrke said.
However, he noted that the EU’s security dependence on the United States may be too strong for Beijing to successfully pull Europe out of Washington’s orbit.
“The dependence on U.S. security guarantees and support on Ukraine is clear. I think if that dependence is undermined, Europe will align itself economically with the United States,” he said.
Is decoupling of the world inevitable?
Many analysts also point out that the growing competition between China and the United States means that Europe’s economic and trade policies may need to undergo major changes, no matter who wins the presidential election in November.
“We have to find other ways to do things, without the U.S. or with less U.S. involvement,” said Bruegel’s García-Herrero.
“This will be the case even if Harris wins the election, because this is all about China — and the rest of the world will pay the price for the United States to abandon open access.”
Rickles of the European Commission for Equality similarly noted that the “general direction of the world” would remain the same, whether Trump or Harris was president, namely toward greater geopolitical and economic divisions.
“We are in a different era now. It’s no longer about markets and prices: it’s about security and the strategic competition between China and the United States. This will drive the world to decouple much faster than we think.”
(Editing by Anna Brunetti / Rajnish Singh)
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