Signal Berlaymont: Will Trump force the EU to finally change course? 

Donald Trump’s landslide victory in the US presidential elections has led to predictable hyperbole in Europe on what this could mean for the EU. A senior official involved in the EU’s preparations for a potential Trump presidency told the Financial Times, “I’m afraid.” Another added “On trade, it will be bad.... And Ukraine is in big trouble.”

Of course, Trump may act entirely differently than in his first term, but the burden of proof for this is on the fear-mongers. Back in 2018, Trump wrote on Twitter: “The European Union is coming to Washington tomorrow to negotiate a deal on Trade. (…) I have an idea for them. Both the US and the EU drop all Tariffs, Barriers and Subsidies! That would finally be called Free Market and Fair Trade! Hope they do it, we are ready - but they won’t!”

In sum, even on tariffs, Trump is very transactional: not that we should expect less from the author of The Art of the Deal. It wasn’t just words. The trade deal he pushed through with Mexico and Canada in his first term was similar to the one that it replaced.

If Trump’s strategy somehow works, and his threat to impose new tariffs on EU imports makes the EU lower its tariffs on products from the US, the EU in theory legally needs to offer the same rates to other members of the World Trade Organisation. Supposedly, this is an optimistic reading of what may happen next, but freer trade, at least within the pro-Western bloc, is actually not out of the question under Trump. Certainly not when US consumers will stand to benefit.

Restricting trade with China would badly hurt Europe and certainly Germany. So hopefully, Trump will strike an agreement with Chinese leader Xi, before Europe gets pushed into a trade war with China.

If Trump doesn't strike first on tariffs, the EU may well do instead. A truce on the EU’s own retaliatory tariffs elapses in March 2025. Eurocrats believe this is leverage to bring Trump to the negotiating table. It is a dangerous assumption, and one that may well backfire. The fresh Trump administration mightn't be so well aware of the EU’s capacity to inflict self-harm. Instead, the EU should follow Swedish classical liberal thinker Johan Norberg's advice: “Trump’s tariffs will primarily hurt Americans. Europe should not respond by hurting Europeans with retaliatory tariffs, but by offering alternative deals that might tempt Trump, and deepen free trade with a global coalition of the willing.”

Ukraine    

Furthermore, Trump also plans to talk Putin out of continuing his war on Ukraine. Bets on how this will fare are divided, to put it mildly. There may be fewer options for Trump than he might think. Even if the US boosted its arms support for Ukraine, it's a very difficult task for Kyiv to regain all its territory stolen by the Putin regime. There is wariness inside of Ukraine, which is struggling to find new army recruits, and in the West, where Trump’s victory follows promises to threaten an end to financial support for Ukraine.

Why would Putin stop after Trump offers him to keep the territory he now holds? Trump could threaten to flood global markets with US oil, or may threaten Putin to give Ukraine a vastly increased arms. Nobody can say if this will work or not. Putin has an interest in keeping the war going, as it is a helpful way to divert attention from problems at home. So ultimately, Trump’s bluff may well fail.

Then, as former UK Prime Minister Boris Johnson recalled, Trump could credibly threaten Putin with boosting aid to Ukraine. According to Boris, in his first term Trump "gave the Ukrainians those shoulder-launched anti-tank weapons when, frankly, the previous Democrat administration — when you look at how they responded to Putin’s invasion in 2014 — they did virtually nothing.”

Never waste a good crisis 

Meanwhile, back in Brussels, the usual suspects are already hard at work not letting a good crisis go to waste. EU officials hope the Trump win may drive the EU to issue more joint debt, a common Brussels obsession. One senior EU diplomat told the press, “The return of Trump would be a beneficial shock that will enable the EU to move forward, like the pandemic or the energy crisis following the war in Ukraine.” The idea is for a group of EU member states to borrow funds jointly—by raising “eurobonds”—to transfer to Ukraine. The move is opposed by “frugal” states like Germany and the Netherlands.

Such an operation would do little to fundamentally help Europe’s insufficient defence capacity, the result of reduced defence spending. Even France, the leading defence force on the continent, is guilty of this. At the moment, seven of ten combat-ready soldiers in Europe are Americans. “In terms of defence, we are a vassal state of NATO, which is a vassal state of America,” according to a senior European diplomat.

To deal with this, as former NATO Secretary-General Jens Stoltenberg also warned in September, European countries should avoid “duplicating” NATO defence efforts with EU initiatives. He said, “What the EU should not do is start to build alternative defence structures, for instance the intervention force.”  This was a reference to the planned 5,000-strong “EU Rapid Deployment Capacity”, something the EU decided on after Russia’s invasion of Ukraine.

In fact, according to senior NATO officials, the EU’s defence efforts have already diverted resources away from existing NATO structures. As an example, they cited a proposed expansion of the EU Military Staff, with one official saying: “Why have two commands without full staffing, when you can have one properly functioning?” He added, EU structures “suck in troops", while NATO struggles with staffing issues.

In his farewell speech, Stoltenberg criticised the EU’s ambition to create its own list of military standards for EU armies instead of using NATO’s lists, which have existed for decades. “Countries can only have one set of capability targets, they can’t have two. That’s NATO’s responsibility. One set of standards, one set of capability targets, one command structure. And that’s NATO,” he said.

If Donald Trump hears about this, he’ll likely ask the EU to scrap these kinds of measures undermining NATO’s capabilities. Far from boosting EU defence, Trump may thus undermine it, to the benefit of Europe’s defence.

Another hit to the punitive climate policy model

Last but not least, Trump is likely to leave the Paris Climate accord again. The EU trade body BusinessEurope is rightly concerned Trump’s policies will punish the EU's businesses for being green. While it's “drill, baby drill” in the US, pressure from EU industry for it to finally start doing something about its overregulation will only increase.

Much that pressure will also come from outside of Europe, as the EU attempts to impose its ever-more-burdensome regulatory rule book on its trading partners. Certainly the EU deforestation rules, whose implementation has now been postponed for a year, have caused a lot of anger. Initially, it was mostly palm oil exporting countries like Malaysia and Indonesia that were angry about it (Especially after they were praised by environmental NGOs like Global Forest Watch for making significant progress in reducing forest loss.). Later, the US followed in asking the EU to rethink these rules, along with Brazil and others.

The key problem is the EU vehemently refuses to recognise the regulatory standards of its trading partners as equivalent, and instead wants them to introduce massive new bureaucratic models instead. This goes against, for example, the approach of the UK, which happily recognises Malaysia’s deforestation standards as acceptable.

Other new pieces of burdensome EU regulation, like on supply chain sustainability reporting, mostly apply to companies operating in the EU's trade partners. Michel Barnier's new French government already complained about it, suggesting postponing implementing these new rules for three years. We should hope Trump will quickly tell the EU to put an end to weaponising trade as a tool to export Left-Green policies.

A new study by the Warsaw Enterprise Institute and like-minded think tanks may well inspire Trump if he's looking for an alternative to the Paris Climate Accord. They suggest replacing this Treaty with a “Climate and Freedom Accord”, under which signatories to the new Accord will benefit from trade advantages, provided they implement climate-friendly free-market policies.

The think tanks argue this would “de-bureaucratise the economy”, along with “tax changes (…) to make investing in PP&E (Property, Plant, and Equipment) more profitable in a way that incentivises companies not only to maintain their current capacities but also to modernise and develop new projects. Subsidies of any kind should be abolished in an orderly and gradual manner.”

Another point of contention between Trump and the EU will no doubt be the EU’s new “carbon border adjustment mechanism” (CBAM). This aims to impose a tariff on imports from countries that don't follow the EU’s costly climate policies. The EU ended up in a brawl with India because of the plan. Scrapping it may solve the problem in the UK, where plans to introduce a similar climate tariffs are estimated to cost between £150 and £300 a person.

Perhaps Trump may well end up saving Europe, but not in the way eurocrats imagine. Perhaps Trump may be the final kick Europe needs to finally take its own defence seriously, end ever greater centralisation of power, abandon punitive climate policies, and stop the Brussels regulatory machine.