Is Europe Ready of a Second Trump Term?

Quick Read:

– EU nations fear Trump might reduce support for NATO, leaving Europe with greater economic burdens and alone against Russia.

– Trump’s proposed tariffs on European exports could weaken the EU’s economy and shrink its industrial output.

– Europe’s dependence on U.S. liquefied natural gas (LNG) shipments may limit its ability to counter Trump’s protectionist policies.

– Expanding trade partnerships with new markets is crucial for Europe to offset potential losses in the U.S. market.

– Trump’s potential withdrawal from the UN climate agreement could create an uneven playing field for European businesses compared to their U.S. counterparts.

– Trump’s strict stance on immigration may deepen internal divisions within the EU.

With the world closely watching the U.S. elections, Europe braces for outcomes that could profoundly shape international relations and the global economy. Among international stakeholders, the European Union stands to be directly impacted by the election results. A second Trump presidency would almost certainly alter the landscape of U.S.-European relations.

The EU finds itself in a tense moment, heavily influenced by the Russian-Ukrainian war, which has strained intra-EU relations and Europe’s ties with the global economy.

U.S. Support for NATO

Europe is increasingly focused on defense, particularly given the socioeconomic and economic reverberations of the Ukraine war across the EU. Several member states have upped their defense spending, often at the expense of developmental agendas, a shift reflected in Europe’s modest economic growth rates.

While the eurozone economy grew at a stronger-than-expected 0.4% in the third quarter of 2024, global tensions and the American election results continue to loom over the sluggish performance of European stocks.

In foreign policy, a Trump administration might reduce support for NATO, alarming Europe’s allies. Europe has invested heavily in supporting Ukraine in its struggle against Russia and is beefing up its military arsenal through advanced weaponry and technology, imposing substantial financial costs on member states. Any withdrawal of U.S. support for NATO would only increase Europe’s economic burdens and weaken its position against Russian threats.

Trade Relations

Trump’s approach to EU-U.S. trade relations is also of great concern. The former president has hinted at imposing a 10% tariff on EU goods, a move that would hit Europe’s exports—primarily automobiles, machinery, and chemicals—hard. Such tariffs could drive up prices, slow production, and force EU manufacturers to lay off employees to cut costs, particularly affecting economies like Germany, Italy, and Ireland that have seen declining industrial output over the past two years.

Adding to Europe’s challenges is its reliance on energy imports from the U.S., especially LNG, after suspending Russian oil and gas purchases. The U.S. aims to ship 50 billion cubic meters of LNG annually to Europe until at least 2030, about a third of what Europe once received from Russia. Any tariffs imposed by Trump could further drive down the euro against the dollar, compounding Europe’s economic strains and slowing growth.

A Tough Task Ahead

The U.S. remains the EU’s largest trading partner, with Europe’s net exports to the U.S. market totaling about €158 billion in 2023. Europe is thus keen to maintain strong economic ties with Washington, particularly as its relations with Russia and China deteriorate. This limits Europe’s options for effective countermeasures to safeguard its exporters and makes it difficult to anticipate what tariffs the EU might impose on U.S. goods in retaliation.

Should Trump win the White House again, Europe’s leaders will face a challenging task in redefining trade and economic relations with the U.S. To mitigate any potential losses in the American market, Europeans may be compelled to diversify their trade partnerships with other economies, though this would require more flexible legislation.

Climate Agreement

European leaders are particularly concerned that Trump could make good on his promise to fully exit the UN Framework Convention on Climate Change, especially after his 2015 withdrawal from the Paris Climate Accord, which he described as a “bad deal” that hurt U.S. jobs and industries. Such a move could undermine European cooperation efforts on climate and put EU companies at a competitive disadvantage, as American firms would not be bound by pre-set environmental standards and climate regulations.

Immigration Policy

Immigration is another contentious issue that could affect U.S.-EU relations if Trump is re-elected. His hardline stance has found favor among Europe’s right-wing parties, which might push for more stringent enforcement of the EU’s migration and asylum pact ratified by the European Commission in June 2024. This could lead to divisions within Europe that might ultimately weaken efforts to strengthen democracy and human rights across the continent. It could also impact the labor market, as some European countries rely on skilled migrants to counterbalance aging populations.

A New Global Environment

A Trump victory would undoubtedly bring a reset to transatlantic relations, presenting a new set of challenges for Europe. Trump’s first term did not see a war in Ukraine, geopolitical tensions in the Middle East, or strained trade ties with China.

Europe’s leaders may find themselves with limited options, forced into more flexible political and trade relations with Washington. This new approach would need to extend beyond Europe-U.S. relations, encompassing partnerships in Asia and Africa as well, building a foundation of equity and fairness to capitalize on growth opportunities in these markets and strengthen the EU’s long-term economic outlook.