In Europe, Trumpology is all the rage. Reminiscent of the Kremlinologists who studied Politburo seating plans to guess the state of affairs in Moscow, today’s Washington watchers seek to divine U.S. President-elect Donald Trump’s likely policies by triangulating the comments and social media posts of his inner circle. The fact is that no one has a clue what Trump will do—most likely not even Trump himself. Instead of scrutinizing his and his team’s every utterance, European governments would be better off assessing their own strengths and vulnerabilities.
The picture is not pretty. For the European Union, the main risk under Trump 2.0 is that U.S. pressure—and the question of how to respond to it—will increase fragmentation among its member states. This analysis holds for the three most pressing economic topics: U.S. trade tariffs, EU-China relations, and Russia sanctions. If the Europeans do not manage to unite, they will struggle to cushion the Trump-2.0 blow, much to Beijing’s and Moscow’s delight.
Trade tariffs top Europe’s list of Trump-related worries. The next U.S. president has mentioned plans to impose tariffs of 10 percent to 20 percent on U.S. imports from Europe, but details are scarce. The mere threat of U.S. tariffs has raised the alarm in Europe, with various member states drafting talking points on why they are special enough to be exempt. Good luck with that. At the EU level, current thinking appears to be that the bloc might dodge the bullet by promising to beef up imports of U.S. liquefied natural gas. This may not prove enough to convince Trump, who has long been obsessed with the idea of reducing America’s $131 billion annual trade deficit with the EU.
Germany, Ireland, and Italy would be hardest hit if Trump makes good on his tariff threats. These three economies are particularly reliant on the U.S. market, which absorbs between 22 and 46 percent of their non-EU exports. And these three countries also happen to run huge trade surpluses with the United States, making them prime targets for a U.S. administration fixated on trade deficits. At the other end of the spectrum, many small EU economies would probably be fine, since the United States absorbs only a tiny fraction of their exports. Belgium, the Netherlands, and Spain even record trade deficits with the United States, suggesting they may not be immediate targets were Trump to single out countries rather than hitting the EU as a whole.
These data highlight an inconvenient truth for EU policymakers: There is a high risk of EU fragmentation in response to a potential U.S.-EU trade war, especially if Trump picks different tariff rates for each of the bloc’s 27 member states. Those EU economies that would be hit the hardest by tariffs (read: Germany) may have little appetite for retaliatory measures that could trigger even greater damage to their exports—especially if these countries also happen to be in the middle of an economic and political crisis (again, like Germany). Such reluctance to retaliate could be at odds with the likely willingness of other EU member states that have less to lose (say, France) to adopt a tougher stance on the United States; these states might also see a trade war as an opportunity to take a leadership role as Europe responds to Trump (again, like France). What’s more, Trump could also choose to carve out bilateral deals exempting, say, Hungary or Italy from tariffs entirely, further complicating the emergence of a unified EU response.
Trump’s second term will also complicate EU-China trade relations. Trump has suggested imposing tariffs of up to 60 percent on U.S. imports from China, a move that would cause U.S. imports from Chinese firms to hit to record lows. (The rule of thumb is that a one-percentage-point increase in U.S. tariffs yields a two-percentage-point decrease in U.S. imports from China.) Even if Trump eventually goes for a lower rate, his rhetoric means that Chinese firms are busy doubling down on efforts to diversify exports away from the United States, including toward Europe. That Beijing is struggling to boost domestic consumption, making exports the only avenue through which to absorb the country’s vast manufacturing output, makes this situation even more worrying for Europe.
This development puts Europeans in a tricky spot at a time when de-risking—that is to say, reducing economic reliance on China—is a priority in Brussels. If Chinese firms cut prices to push more of their products to Europe, cheaper Chinese imports could look attractive for EU consumers, making it even more difficult for European firms to embrace de-risking endeavors. This situation would turbocharge divisions among EU member states on how to approach relations with China. Hawks—including the Baltics and Poland—could see China’s struggle to find takers for its exports as an opportunity for a tougher EU stance on Beijing. Others, meanwhile—say, Germany and Hungary—may well double down on their China-friendly approach.
To the horror of Europeans, Trump could go even further by compelling EU firms to make a choice between the United States and China. To do so, Washington could impose secondary sanctions on some Chinese banks, forcing all businesses around the world to make a choice between doing business with China or the United States. There are precedents: In 2018, the Trump administration used secondary sanctions against Russian aluminium producer Rusal, triggering a global wave of panic as aluminium consumers struggled to get hold of non-Rusal supplies. If Chinese banks were placed under secondary sanctions, EU disunity is almost a given, and some EU capitals may seek to revive old proposals to fight U.S. extra-territorial sanctions.
EU fragmentation on sanctions could also play out when it comes to Russia-related measures. Since Trump’s reelection, Europeans have been pondering whether and how they may need to support Kyiv on their own if he chooses to stop aid to Ukraine. To the Europeans’ alarm, Trump has repeatedly pledged that he would end the war in 24 hours. In a bid to strike a deal with the Kremlin, Trump could offer to lift some or even all U.S. sanctions on Moscow. Canceling some of these measures would have little impact, for instance the asset freezes and travel bans on well-connected Russians. However, a U.S. pull-out from joint U.S.-EU sanctions, such as the G-7/EU price cap on Russian oil exports, would come with bigger consequences.
Such a scenario would immediately force Europeans to answer two questions. First, would the EU continue to impose sanctions on Moscow on its own? Second, would EU sanctions have much bite if Washington is not on board? In case of a U.S. sanctions U-turn, the priority for Brussels would be to clarify the outlook of the $50 billion loan that G-7 economies have extended to Ukraine. The loan was designed to be repaid through revenues from frozen Russian central bank assets. If Trump were to unfreeze these reserves, the loan would be in trouble. Yet the Kremlin might have a different wish list for sanctions-lifting. Seen from Moscow, those sanctions that bite the most are the ones that lead to a slow asphyxiation of the Russian economy. These include curbs on Russia’s ability to issue external debt at a time when Moscow’s fiscal buffers are running low, as well as export controls that restrict Russia’s access to the Western technology it needs to maintain its oil and gas production.
If Trump lifts sanctions on Moscow, it is hard to imagine that the EU would manage to unanimously renew its own Russia sanctions every six months, as required by law. Moscow-friendly Hungary stands at the top of the list of countries that could oppose rolling over the measures, not least if Budapest manages to extract tariff concessions from Washington in return for facilitating some form of EU leniency toward Moscow as part of a grand bargain between Trump and Russian President Vladimir Putin. Europeans would also find it even harder to fight against the Kremlin’s discourse suggesting that sanctions are useless—a popular narrative despite the increasingly obvious cracks in the Russian economy. For once, Kremlin propagandists and their Western supporters would have a point: If Washington were to pull out, the effectiveness of EU-led measures would be limited, not least because the bloc often relies on U.S. government agencies to spot sanctions evasion and enforce penalties.
All things considered, Trumpology’s usefulness is limited. Experience from Trump 1.0 suggests that personnel turnover is typically high and that he likes to change his mind often and unpredictably. Instead of looking across the Atlantic, EU leaders could be more effective if they laid the groundwork for the bloc to remain united, no matter what the United States throws at Europe. That is a tall order, but it is also the EU’s best shot at preparing for the coming Trump storm.
This post is part of FP’s ongoing coverage of the Trump transition. Follow along here.