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A guide to what the 2024 US election means for Washington and the world.
If you’re an FT reader, you’re probably old enough to remember when Joe Biden threw hundreds of billions of dollars in subsidies into green technology and Europe panicked. Last week, Donald Trump reversed Biden’s industrial policies and instead promised massive investments in AI and fossil energy, sending Europe into a panic once again. No matter what the US president does, Europeans seem to be in an existential crisis.
This should give some perspective on the “peak pessimism” expressed at Davos. Perhaps, perhaps, it reflects European attitudes more than the EU’s objective outlook. This is not to deny that a second Trump administration will pose major challenges to the region’s economic and geopolitical models. But that model was already ripe for change. The EU would do well to be more entrepreneurial about its fears and use the rise of Trump as a source of opportunity. It is both to facilitate long-overdue change and to benefit from the self-harm the United States is about to commit. Burden yourself.
Let’s start with trade. President Trump wants to reduce the US trade deficit with the EU. European leaders want to increase investment in the country. These desires amount to the same thing. As EU leaders increasingly recognize, the EU’s trade surplus is also a huge savings surplus, which is exported to finance investments abroad. I need to save every penny. Allocating these savings to domestic investment means leaving behind a growth model based on export surpluses.
Europe’s instinct to appease President Trump and restore access to the US market is understandable. But this instinct is outdated. Instead, learn from a more sober (all relative) strategy towards China. It’s not about decoupling, but it’s about reducing risk. Friedrich Merz, the potential next German chancellor, has rightly warned companies that rely on China that they must face the risk of disruption themselves. The same idea can be applied to the United States.
Then there’s defense. Europeans will have to spend more on this – not because the president of the United States says so, but because Russian belligerence threatens their freedom. But President Trump’s call to raise defense spending to 5% of GDP provides the stimulus needed to break political inertia by shifting the question from whether to significantly increase spending to how to spend it. There is a possibility that it will happen.
In the short term, this means more arms purchases from U.S. manufacturers, easy commitments in exchange for other favors in Washington. Ironically, in the medium term it could lead to the opposite outcome. This is because European arms producers can be assured of sustained and higher demand. Especially if governments eventually succeed in standardizing specifications and joint procurement.
Next is energy. The EU is suffering from soaring energy prices and has been unable to part with Russian pipeline oil and liquefied gas. All President Trump wants is more oil and gas sales to Europe. The quickest way to achieve this would be to complete EU sanctions on Russia’s fossil fuel purchases, but this would require unanimity and Russia-friendly member states could resist it. There is. The smart thing to do is to point out that it is Mr. Trump’s own supporters, from Budapest to Bratislava, who are standing in the way of bigger orders, and ask him for help.
In addition to a political starting point for realizing Europe’s existing priorities, the Trump presidency also provides new opportunities for exploitation. If Mr. Biden’s subsidies for renewable energy and green technology siphoned investment from Europe to the United States, today’s change in direction should logically do the opposite. Perhaps those fears were always going too far. But MAGA’s antipathy toward greening strengthens the case for doubling down on incentives to make decarbonization investments, which have just become less profitable in the United States, more profitable in Europe.
Let’s also think about immigration. For a long time, Europe has been losing talent to the United States, and the lack of qualified talent is a common complaint from tech companies. If MAGA America proves too extreme for the world’s educated young workers (and Britain remains nervous about immigration), an open door EU could become a global magnet. There is sex. A high-skilled immigration system that allows movement between EU countries, such as the Blue Card initiative, is likely to be a pan-European law for innovative companies that European technology companies want and that Brussels has promised to deliver. This should be strengthened in conjunction with the national framework.
Europe should heed the words of a former US president: “Europe has nothing to fear except itself.” The best response to President Trump’s invasion is to use it to make Europe great again.
martin.sandbu@ft.com
