When economists talk about contagion, they usually refer to the transmission of shocks to other countries or regions through economic or financial channels. Policies promised by President Donald Trump could create shocks that affect aggregate demand, prices and exchange rates, creating uncertainty for investors. But President Trump also political An infectious disease that harms the very functioning of the European Union.
Political contagion can arrive through several channels. The first is through direct Russian-style election interference. Trump ally Elon Musk is openly trying to influence European voting through the X Platform’s algorithms. Support for far-right parties in Germany Alternatives for Germany and criticism Keir Starmer British Prime Minister. This use of social media is a qualitatively different level of interference than in the first Trump administration, when Steve Bannon tried to promote Trumpism through far-right party rallies, and it had far more potential to cause political upheaval. big.
Second, Trump is trying to change the norms of international relations by talking loosely about a US takeover of the country. Greenland or the Panama Canal?or the absorption of Canada. Even if these statements come to nothing, they signal a fundamental shift in the role of the United States from a bastion of UN international norms to a destroyer of settled borders. Territorial integrity and the peaceful resolution of international disputes are fundamental principles of the United Nations Charter and European integration.
Third, President Trump has once again stepped up his efforts to undermine global institutions through moves such as withdrawing from the Paris Climate Accord and imposing tariffs that undermine rules-based trade.
Fourth, Trump is changing the norms of good corporate behavior. Powerful American companies such as Meta and Amazon have appointed President Trump’s favorites to their executive teams and boards of directors. Trumpism weakens laws and weakens enforcement, resulting in decreased compliance, increased uncertainty and corruption. Key members of the next government are discussing: Non-compliance with business regulations. To make matters worse for Europeans, American business leaders like Mark Zuckerberg are challenging the extraterritorial scope of EU law.
These actions challenge European democracy, which is based on the values of checks and balances, separation of political and business interests, and the rule of law. But they are an existential threat to the European Union itself.
The EU’s governance system has been significantly tested over the past 15 years by the government of Viktor Orbán in Hungary. His eroding of the rule of law and weakening of checks on executive power has been raised in Poland and now in Slovakia. Prime Minister Orban has also applied Trump-style transactionalism within the EU, using his country’s veto power to oppose the deal. Assistance to Ukraine. If such behavior becomes widespread among Europe’s “mini-Trumps” now, it will at some point paralyze EU decision-making.
Prime Minister Orbán also pioneered free riding on EU laws and institutions, benefiting from EU membership but making backroom deals with Russia and China that undermined EU cohesion. President Trump may propose more such bilateral agreements to wean individual EU countries.
How can the EU protect itself? First, defense spending must increase as President Trump seeks to maintain U.S. involvement in European security. The EU will need to form coalitions more frequently in its internal affairs to avoid paralyzing veto power. An intergovernmental agreement on defense procurement that excludes Hungary and includes non-EU members such as the UK and Norway would be a good start. To strengthen rules-based multilateralism, the EU should strengthen its alliances with other trade-dependent economies seeking international climate action. Many countries will suffer from an America First policy.
However, the most fundamental protection for the European economy is maintaining the rule of law. As a regional organization, the EU relies on “honest cooperation” and the near-voluntary compliance of member states with treaties and laws. Despite being a regulatory powerhouse, the EU actually has relatively weak enforcement mechanisms. Many of the primary protections for values rely on soft law and good behavior by governments. If EU institutions turn a blind eye to violations of law, it could be fatal for the legal community on which the EU is based.
Europe’s political leaders need to set the right expectations. Historically, there are many examples of the effects of environmental change on the economy. Zeitgeistfrom the recession of the 1930s to the globalization of the 1990s, expectations led to widespread behavioral changes. The private sector followed signals from political leaders who brought about structural changes in the economy. European leaders’ response to President Trump’s assault on democracy, international norms and the rule of law must be firm and clear. In particular, the EU should not become bearish on Big Tech companies. Blogal Key. The very survival of the EU is at stake.
