The Liberation Day tariffs will reduce US and global growth and employment, demonstrating this administration’s economic illiteracy. But they also damage the US’s political reach. Having already lost its global leadership role, its position will be further undermined by the apparent failure of these tariffs to bring the rest of the world to heel. There seem to be few deals to be had, with most important economies showing their willingness to fight.
The tariffs push Europe further away and will trigger more cooperation between like-minded countries to reduce the US’s clout. Within the EU, even the Trump sympathisers have been hit, reducing the likelihood of open disunity. China correctly read Trump as not being a hawk but erroneously concluded that there would be a tolerable economic deal. Consequently, China now needs Europe more than ever to fight against Trump’s measures and as a market for its surpluses. For the rest of the world, it highlights that Trump will only ever consider US short-term interests over and above anything else, reducing his leverage and bargaining power.
What does this mean for Europe? Despite Trump’s failures, the economic and political costs of his actions are real and the demise of the global system will hurt Europe. Security will remain the crucial bargaining chip where Europe is intensely vulnerable. But it all shows that Europe can no longer rely on the US in any sphere and will have to develop its own agency or decline catastrophically.
Fabian Zuleeg is Chief Executive and Chief Economist at the European Policy Centre.
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