Trump scored a goal at his own goal. He gave Europe a powerful weapon
In economic terms, the world is divided into three separate blocks, which have recently entered the competition: the United States, China and Europe. Trump's decision to make a trade war with the rest of the world – with particular emphasis on their enemy No. 1, which is Beijing – creates a unique opportunity for the European Union.
After all, it is no secret that even when being in the last place, we can still find ourselves in the lead if two players in front of us start digging holes under them.
“We have someone who shoots suicide and this is Trump,” said Francois Villeroy de Galhau, president of the French Bank, on French television.
This suicide can open the door to Europe, which has been closed to it until now. The most important question is – will she be able to use it?
The lowest decline in the USA
There is a lot to catch up. Europe came out of the Covid-19 pandemic in poor condition-its economic growth was on average only half of America's growth. In Germany, the largest economy of Europe, there was a wave of closures of plants – the smelter and car factory fell under the weight of energy shock caused by Russia's invasion of Ukraine. Theoretically, the uniform EU market provided companies with easy access to almost 450 million consumers in the EU, but in practice it remained crushed, and the decision -making processes were burdensome and ossified.
The appearance of Trump in the White House, and especially his decision to impose duties on a number of countries – however, he may begin to change this situation.
This year, Euro strengthened by 10 percent. In relation to the dollar, because investors turn it into more stable currencies. Even more impressive are changes in trade in bonds, traditionally considered a safe investment in times of instability. After Trump has announced a decision to impose duties on a number of countries, investors sold American bonds, causing an increase in federal financing costs. Looking for financial security, they fled to European bonds.
– Given the energy with which the international role of the dollar and American government bonds as safe assets, it seems that The euro has gained a new impulse to gain recognition on the international arena – said Davide Oneglia, director of European and global macroeconomics at TS Lombard, a company dealing with economic forecasting.
After Trump's decision to impose duties The International Monetary Fund reduced the perspectives of the United States's economic growth to 2025 by 0.9 percentage points – This is the biggest decline among all main economies except Mexico. The forecast for China was reduced by 0.6 percentage points The euro zone came out of this situation relatively unscathed – it recorded a decrease in the forecast by only 0.2 percent.
The last will be the first
Last year, Ursula von der Leyen began the second term as chairwoman of the European Commission. She has repeatedly emphasized the need to increase Europe's competitiveness. Although this is a rather vague term, European leaders considered it a wise approach.
While the EU has been struggling with a number of difficulties for the last decade, the US has produced new technological giants at a pace that Europe could only dream about. They managed this thanks to the combination of well -functioning financial markets, the best research universities and wealthy consumers. China – which has long been a world factory – began to dominate the production of the latest solutions in the field of pure energy, electric vehicles and robotics thanks to their industrial policy.
And although all this still occurs, the decisions taken this month – even by Washington and Beijing on the introduction of duties for mutual imports exceeding 100 percent. – They put Europe in a favorable situation.
Dutch imposed by Trump on imports from Europe, although higher than before, are not even similar to duties in force between the USA and China. These appear when the Asian economy comes out of the controlled destruction of the real estate sector and tries to limit export to increasing national consumption.
-The prolonged trade war between the United States and China can open new markets for European enterprises-said Ludovic Suttor-Sorel, head of European Macro Policy Network. China is already dependent on European products in such categories as chemicals and transport equipment and this trend will probably continue. He added that American demand for some European industrial goods, which were previously bought in China – such as machines, plastics and textiles – may increase.
The Trump administration expressed hope of concluding Beijing on the reduction of customs duties, but in the meantime transatlantic transport dropped sharply, which announces shortages on the supermarket shelves. Constant changes in the position – Chinese officials even deny that conversations are taking place at all – the US's credibility undermines, regardless of how matters are.
There is also the rest of the world, which thanks to the leadership of the United States largely adopted free trade, making it a source of its prosperity. Now she is watching her greatest supporter turns away from her. This means that Europe must take over the baton.
This did not escape the attention of the chairwoman of the commission, which in the commentary for Politico, without mentioning the names, criticized the chaos in Trump's administration.
“In an increasingly unpredictable global environment, countries are queuing up to cooperate with us,” she said.
Use of crisis
According to the economist Paul de Grauwe, however, a lot depends on Europe's ability to maintain free trade with the rest of the world. “If we succeed, the United States will become an isolated fortress of protectionism, which will lead to inefficient and high prices of industrial goods,” he said.
– Usually the crisis creates new possibilities. If it is detected early enough and reacts to it properly, you can transform the crisis into something that will ultimately bring beneficial effects – he added.
Conclusion of free trade contracts is a difficult process. Conversations on the Mercosur trade agreement between Europe and South America began in 1999, and the political agreement was only signed in December 2024. France delayed them, but it seems that the Trump's effect weakens the resistance of even the most resistant French. In addition, the EU also talks to India – the European Commission intends to end it by the end of the year.
There are other possibilities. The American dollar enjoys the status of the actual world currency. Central banks keep him in their reserves, and world trade often takes place in dollars. This gives the United States a huge geopolitical advantage, reduces the costs of taking loans and provides American consumers with access to cheap goods from around the world.
In Trump's administration, however, there are important people who question whether the special dollar status is certainly so beneficial for domestic production. It is not known to what extent Trump himself is aware of it or whether he is careful at all. It is certain that after April 2, the dollar ceased to be as a certain currency as before. For many, euro has become an obvious alternative.
“The world is in the face of the crisis of trust in the dollar, because the effects of” liberation day “are still felt,” wrote David Folkerts -landau, chief economist of Deutsche Bank, in a note for bank clients. Trump's duties called “the biggest shock for the global financial and trade system” since 1971, when the world eventually abandoned the gold standard.
Transition to the euro
Despite all his imperfections, the EU still observes the rule of law, which – according to many observers – applies less and less to the United States. This country has even accelerated immigrants' deportations to its authoritarian allies and trying to release the heads of previously independent government agencies.
Unlike China, EU allows free flow of capital through its borders, which is a condition for the widespread acceptance of its currency. Investors want large and open economies to use their currencies, run a business and place their investments. Nobody yet claims that the euro will completely replace the dollar. Since the introduction of this currency, its participation in global foreign currency reserves remains generally stable at the level of about 20 percent. However, as Nicolas Véron from Think Tank Bruegel claims, the last events “prompted people to reflect.”
– If trust in the dollar falls where people go? – asks Veron. – If you ask this question, there will be Euro in the center of attention.
The President of the European Central Bank Christine Lagarde recently told EU leaders not to waste the opportunity offered by the crisis, and continued the reforms of the European banking sector and financial markets. They are intended to make the block a more attractive place for capital. If the euro manages to take away at least part of the market share from the dollar, this may reduce the costs of loans for European enterprises, which would be particularly beneficial for the key start-up sector. It would also give Europe a greater advantage at the time of increasing geopolitical competition.
Many things can go wrong. Dutch will undoubtedly harm European economic growth. If Trump leads the global economy to a full recession, there is always a risk that investors will resort to traditional safe marina – American, not European assets. This is what happened during the financial crisis in 2007, despite the fact that its source was the American mortgage market.
All benefits also depend on whether Brussels will play their cards well. Washington will almost certainly try to force Europe to break relations with China and conclude an alliance with the USA, and then all commercial benefits will disappear. However, compared to the beginning of the second term of von der Leyen last year, today, EU competition seems slightly less unilateral. And in the football match, watching how the opponent scores a goal at his own goal gives great satisfaction.
