As Europe now ponders the next four years with Donald Trump in the White House, the dominant thought seems to be that he’s yet again got his eyes on Europe. Last week, both Emmanuel Macron and Mario Draghi warned about Trump soon putting huge tariffs on EU exports to the US. And hasn’t Trump threatened to pull out of NATO? With rag-tag troublemakers like Tulsi Gabbard and Matt Gaetz nominated to the administration – and more serious sceptics of Ukraine’s war effort like J.D. Vance and Marco Rubio in key positions – many European leaders now fear America to pull out of Ukraine at any cost and leave Europe to fend for itself.
Who knows what will happen? But here is a heretical thought: what if Trump’s starting point with Europe isn’t fury and revenge but casual negligence? Perhaps the attitude has less of the mad antics of Don Trump and more of the famous Mad Men meme with Don Draper. With fearful Germans running around in circles to court Trump and a strutting Macron spotting an opportunity to get another lease on his political life, Trump may be looking at them and say: “I don’t think of you at all!”
Obviously, the new administration will prod Europe to spend more on the military and rebuild Europe’s defence at a faster rate. Few know what Trump has in play for the war in Ukraine, but he’s surely banking on Europeans taking care of Ukraine and its defence after any form of truce, if such an outcome is about to happen. This is a strategy full of risks – also for the United States. A Trump-led approach to an agreement that lets Russia keep what it has taken may be billed as “peace in our time,” but just like in 1938 with Neville Chamberlain’s deal with Hitler, it may signal weakness and invite more war. A US-led initiative for a truce will have to be backed by continued US presence in Europe and NATO, and people around Trump seem to acknowledge this reality.
What about the tariffs? We don’t know yet how the administration will design its tariff policy. Trump and some of his associates seem to think an across-the-board hike in tariffs of 10-20 percent (higher for China) is the right way to go. Trump’s former Trade Representative, Robert Lighthizer, is more of the reciprocal school of trade policy: he wants to raise US tariffs to the bilateral tariff rates faced by US exporters. Trump thinks tariffs will raise inward investment to the US and strengthen the US dollar. By contrast, Lighthizer wants a weaker dollar and more investment outflows from America.
Either way, Trump’s first term taught us he’s transactional in trade policy and is prepared to do deals. Yes, he thinks Europe is a sponger running a 150 billion euro manufacturing trade surplus with the US. But Trump will also be informed that the US has a 100 billion euro trade surplus with Europe in services and that Europe’s increasing spending on military equipment is leading to a ballooning defence trade surplus for America. Importantly, it’s obvious that the EU will retaliate and hurt the US economy if the US imposes tariffs. Perhaps, then, a broad tariff package against Europe isn’t going to be on the cards. Moreover, in the next two years, Trump has other economic priorities than forcing through big tariff hikes on Europe – cutting taxes, deregulating the economy, and reinforcing the policy of isolating China. Europe isn’t a champion of open trade anymore either, and if it continues to move closer to the US on China policy, the EU will likely get some rewards.
The risks for Europe with the new Trump administration may be in other areas than security and tariffs. Technology policy is one of them. Under the Biden administration, there was initially an ideological convergence on especially big tech, data and AI regulations, and muscular uses of competition policy. The broad outlook of the Federal Trade Commission’s Lina Khan and Senator Elizabeth Warren – both favouring an EU-style regulation approach to technology and innovation – was in the ascendance, sometimes supported by MAGA Republicans in Congress who wanted to nix censorious US platforms.
But a change has been under way. Europe’s rhetoric of technology revanchism against the US has worn patience thin in Washington, DC. More importantly, the increasingly strategic role of technology and technology companies – not just big tech – have muted old concerns. The priority now doesn’t seem to be using antitrust rules to force big tech to heel but to support it in the technology race with China. The intimacy between security and technology firms in the US is likely to grow stronger.
This can become a major Transatlantic conflict zone. New tech intimacy may prompt old-new questions in Europe about America’s adequacy status. More broadly, the US boosting its tech leaders while the EU continues to guard against them seems to lead the two into economic conflicts. European taxes – e.g. digital service taxes – and the antitrust tax decision (Apple) have already drawn the ire of Trump. Hardliners in Washington already talk about taking remedial actions against the EU for its technology protectionism. With more to come on EU technology regulation – for instance, new market barriers in the Data and AI Acts – Europe’s concern should be that it won’t be able to act without impunity anymore.
For instance, notable US voices have talked about changing Section 301 in the US Trade Act to allow for actions against ICT services – forcing government reviews on EU firms who want to sell in the US and reducing European access to US data-intensive services. Taking selected EU firms out of Department of Defence technology procurement and cooperation is another proposal that has been floating around for years. Towards the end of the last Trump administration, there were speculations about the US attempting to get a strategically important company like Ericsson to either be acquired by a US company or relocate to America. With many EU tech-sophisticated companies already earning their margins and profits in the US rather than Europe, this may happen without any pressure. Just the other day, the CEO of Ericsson talked in a Bloomberg interview about the option of moving the company to the US. Other firms that are equally integrated with their US customers have already been gradually weaved into a US regulatory and economic security context (e.g., ASML) and may be prompted to make the hump as well.
Europe may provoke the US into defensive or offensive trade actions also because of other policies. The EU’s new Carbon Border Adjustment Mechanism (CBAM) will kick in over the next years, adding new tariffs on imports from countries in selected carbon-intensive sectors such as steel and aluminium. Even if US exports aren’t the big targets for Europe, some US firms will be affected. This policy didn’t land well in Bidenland and won’t get better treatment on Planet Trump. Expect remedial and retaliatory actions – or more.
This takes us into familiar territory: Europe’s passive-aggressive attitude toward the US. We can’t really accept that Europe isn’t the major plank of US foreign policy anymore. We expect America to swallow our own follies while we get hysterical over its madness. The best way to deal with Trump is to make our own bed and make us more of an attractive partner. A Europe of low growth, choking regulations, and weak tech performance is a Europe that will invite casual negligence by the US – combined with some harder reactions when an administration is provoked. A Europe that becomes serious on economic growth and innovation, and that starts to spend seriously on defence and military capacity – that also can make contributions to security and stability in other regions – will become far more interesting for partners and far more worrying for enemies.