Summary
- Eight months into the second term of Donald Trump, Europeans are still struggling to craft a coherent response to American geoeconomics policies in the trade, investment and financial spheres.
- The Trump administration poses massive challenges to Europe. It has imposed tariffs on nearly all US imports from the EU. It is also considering applying pressure on investors to pick sides between the US and China. Finally, it could soon try to engineer a forced depreciation of the dollar against other major currencies like the euro.
- For the EU, the best response to baffling Trumponomics is to keep calm and carry on. European policymakers should adopt a self-help mindset—resisting the urge to impose retaliatory measures that could damage European economies, avoiding futile fights over US policies that will not change, and above all, holding the bloc together.
- Europeans should also use this turbulent moment to push through controversial economic reforms. Such policies include deepening the single market to support those EU exporters that will lose market share in the US; leveraging access to the EU market for digital services; boosting innovation financing through regulatory changes; increasing the global role of the euro; and bracing for the coming currency wars.
- Europe’s ability to implement much-needed reforms will shape the bloc’s economic prospects, global standing and resilience long after Trump leaves the White House.
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