Unlock the White Home Watch e-newsletter without spending a dime
Your information to what the 2024 US election means for Washington and the world
FT readers are sufficiently old to recollect when Joe Biden dedicated a whole lot of billions of {dollars} in subsidies to inexperienced know-how — and Europe panicked. Prior to now week, Donald Trump has undone Biden’s industrial coverage, whereas promising big investments in AI and fossil vitality as a substitute — and Europe is panicking once more. It doesn’t matter what a US president does, it appears, Europeans see an existential disaster.
This could give us some perspective on the “peak pessimism” expressed in Davos. Maybe, simply maybe, it displays European attitudes greater than it does the EU’s goal prospects. That isn’t to disclaim that Trump’s second administration will pose big challenges to the bloc’s financial and geopolitical mannequin. However that mannequin was already ripe for change. It might go well with the EU to be extra entrepreneurial about its fears, and use Trump’s arrival as a supply of alternatives — each to make it simpler to make the adjustments which might be lengthy overdue, and to learn from the self-harm the US is about to inflict on itself.
Begin with commerce. Trump desires to shrink the US trade deficit with the EU. European leaders need to improve funding at house. These needs quantity to the identical factor. As EU leaders more and more acknowledge, the EU’s commerce surplus can also be an enormous financial savings surplus exported to finance investments overseas. The penny must drop: redirecting these financial savings to home investments means forsaking a development mannequin pushed by export surpluses.
The comprehensible European intuition is to placate Trump and hope to salvage their US market entry. However this intuition is out of date. Be taught as a substitute from the extra clear-eyed (all the pieces is relative) technique in the direction of China: de-risk, although not decouple. The possible subsequent German chancellor, Friedrich Merz, rightly warns firms reliant on China that they should face the dangers of disruption on their very own. The identical mindset could be prolonged to the US.
Then there’s defence. Europeans should spend much more on this — not as a result of the US president says so, however as a result of Russian belligerence threatens their freedom. Trump’s demand to boost defence spending to five per cent of GDP can, nonetheless, be the prod wanted to interrupt via political inertia, by shifting the query from whether or not to spend considerably extra to how.
Within the quick run, this implies extra weapons purchases from US producers — a simple promise to commerce for different favours in Washington. Within the medium run, paradoxically, it may result in the other, as European arms producers get the understanding of sustained and better demand — particularly if their governments lastly handle to standardise specs and procure collectively.
Power is subsequent. The EU struggles with excessive vitality costs, and hasn’t managed to give up Russian pipeline oil and liquefied gasoline. Trump would really like nothing greater than boosting oil and gasoline gross sales to Europe. The quickest option to obtain this might be to finish the EU’s sanctions in opposition to shopping for Russian fossil fuels — however this requires unanimity, which Russia-friendly member states resist. The good factor to do is request a serving to hand from Trump by stating that it’s his personal admirers, from Budapest to Bratislava, who stand in the way in which of a much bigger order e-book.
Along with a political springboard to grasp current European priorities, Trump’s disruption additionally affords new alternatives to use. If Biden’s subsidies for renewables and inexperienced tech sucked funding from Europe to the US, then at this time’s about-face should logically do the other. Extra seemingly, these fears had been at all times overdone. However the Maga antipathy for something inexperienced strengthens the case for doubling down on incentives to make extra worthwhile in Europe the decarbonisation investments which have simply change into much less worthwhile within the US.
Take into consideration immigration, too. For a very long time Europe has bled expertise to the US, and the scarcity of certified employees is a standard grievance from high-tech companies. If Maga America proves too excessive for the world’s younger well-educated staff (and the UK stays neuralgic about immigration), an EU that throws its doorways open may change into a world pole of attraction. Excessive-skilled immigration schemes that permit motion between EU states, such because the Blue Card initiative, needs to be enhanced, maybe along side the pan-European authorized framework for modern firms that European tech has requested for and Brussels has promised to deliver.
Europe ought to heed the phrases of an earlier US president: it has nothing to worry however worry itself. The perfect response to Trumpian aggression is to make use of it to make Europe nice once more.