What[1] might the sky-high tariffs and shockingly disruptive foreign policymaking that have marked the first months of Trump’s presidency mean for the future of Europe? Observers have struggled to make sense of the new US approach to trade, as it flies in the face of what economic theory would tell us is best for the US: liberalisation and openness. Many think that cooler heads will surely prevail as US firms dependent on the global economy will make their preferences heard, such that the trade system will reset to some version of the post-cold war globalisation, underpinned by the transatlantic partnership.
For the EU to effectively attract the support and confidence needed to play the role of a hegemonic system stabiliser of the global economy, it must develop a stand-alone, integrated military capacity so that it can shape this next phase of the global political and economic order.
While appealing, this hope overlooks a basic and crucial point: all global economic orders rest on an underlying political order, and the geopolitical order of the post-war era has now changed forever. Self-inflicted US decline has brought us to this clear end point, yet there is tremendous uncertainty about what will come next. At least two scenarios seem worth considering, however. The first is a throwback to great power spheres of influence and a less prosperous and more violent world. The alternative is a new order based on a coalition of the willing led by the EU. This EU-centred order would be one of managed globalisation and economic statecraft, but anchored in institutions and law, and backed by a newly militarised Europe. While many are rightly sceptical of the EU’s ability to play this new global role, the continued desire of many countries to continue an open global economy, plus changes in the EU as a polity, might bring it about.
1. Trump’s great power throwbacks
The first scenario for the future of trade and the broader global order is one where President Trump’s actions and intentions lead to a fragmentation of the international system and a new version of spheres of influence. Although it is hard to discern a clear set of ideological principles driving the Trump Administration, there appear to be parallels with late 19th century US history in the McKinley Administration. Known for its pursuit of realpolitik goals that historians such as Daniel Immerwahr argues should be understood as a ‘hidden empire’, the McKinley presidency saw the US using its nascent military and economic power to occupy and coerce other states to bend to its will and provide key resources like guano, the critical mineral of its day. Those early great power moves seem echoed in Trump’s territorial provocations around Greenland and sabre-rattling around the Panama Canal.
However, another less obvious historical analogy might capture some of the key elements of Trump’s positioning of the US and his Administration in the world political order: the tributary system of early modern China. Here, Chinese leaders exerted dominance in Asia through ritualised diplomatic and economic relations, with foreign states acknowledging the Chinese Emperor’s authority by sending tributes, or gifts, and performing the kowtow, or prostration, in return for trade ties and recognition. This projection of Chinese hegemonic power was an alternative to the balance of power, spheres of influence model of the West, but it likewise achieved a hierarchical structuring of the Asian political order.
Today, however, we seem to be seeing the major actors in the international system pushing back on the exertion of US power through these throwback efforts. Notably, Canada, China and the EU have refused to acquiesce to the imposition of US tariffs and instead have countered with their own actions. So, rather than a global order based on an erratic US bent on domination, what if an alternative order comes together in opposition to Trump’s capricious destruction? One with more continuity in market openness and commitment to liberal democracy and the rule of law? In this scenario, there is a clear opportunity for the only polity that can step up and transform into the system leader of such a global order: the EU.
2. The EU as the new leader of the global political order?
Most countries around the world do not want to see globalisation fully dismantled but rather have invested interests in a relatively open economic flows of goods, services and money alongside a robust and trust-worthy international reserve currency. Thus, rather than accede to a US assertion of power and closure of global markets accompanied by territorial threats and performative hierarchy, significant support is likely for a vision of global leadership that is based on legalism, institutions and diplomacy –the EU’s foundational DNA–. This posture is to be found across countries like Canada, that has already indicated a range of ways it wants to work with the EU, but also in the global south, which is worried about the US foreign-policy turn. OECD members, including Japan and Korea, are likely to bandwagon with the EU if it is seen as an alternative to Trump’s great-power revisionism. Even China, despite its own authoritarian domestic regime, is likely to view the commitment to openness on the part of the EU as much more attractive than a retreat into protectionism and regional blocs as may happen in the absence of US leadership. In this scenario, the EU could negotiate deeper trade area agreements across this universe of willing partners and be a magnet for a new era of post-US world order.
But does the EU have both the willingness and the capacity to take on this role? Historically, the economist Charles Kindleberger reminds us, the global political economy works best when a state can provide at least three things to the world: (a) an open market in periods of economic distress; (b) confidence that they will be the lender of last resort in times of crisis; and (c) the willingness to provide counter-cyclical lending as needed. The EU’s Single Market and its institutional and ideational commitments to free trade take care of the first element. The European Central Bank has the potential as well to act as a global lender of last resort, despite its past austerity traditions. In fact, the euro has seen its value rise as investors view it as the haven for a flight to safety given Trump’s disruptive actions. Calls for the EU to establish a permanent Eurobond to offer an alternative to the increasingly shaky US Treasury bills have become commonplace even among establishment actors. However, until the EU has a real fiscal policy capacity for spending, providing for Kindleberger’s third point of counter-cyclical lending will remain elusive, jeopardising the global economy in economic downturns.
EU fiscal capacity is also critical to another key historical lesson about how global political orders are constructed. Not just Kindleberger’s benign economic leadership, but rather hard hegemonic political power is necessary to create stable global governance regimes, as the international relations theorist Robert Gilpin argued. This is the biggest sticking point for the EU, which has depended for its entire existence on the security guarantees offered by the US and originally built as a market-oriented, peace-project. For the EU to effectively attract the support and confidence needed to play the role of a hegemonic system stabiliser of the global economy, it must develop a stand-alone, integrated military capacity so that it can shape this next phase of the global political and economic order. And to fund that, it needs a European-level revenue stream, which, of course, dovetails with market desires for Eurobonds.
So, this is where the EU’s scramble to develop itself as a military power in response to the break-up of the transatlantic alliance and the threat from Putin’s expansionist Russia comes together to create the conditions that might, finally, move the EU to finally become a true global power. The path to market activism and strategic restructuring of EU markets for both domestic and geopolitical reasons is well on its way in the EU. The first months of the Trump presidency have brought the EU to taboo-breaking initiatives such as ReArm EU, but many high barriers to an effective and autonomous European security architecture and capacity remain. Nonetheless, the perfect storm of the implosion of the US as global hegemonic leader, the desire of the majority of states to uphold a relatively open, well-governed global economy, and the EU being forced to provide its own security, means that the EU generating a new global order cannot be dismissed. It is time for us to reimagine the new geopolitical era we are in, and the political and economic logics at work are undeniably powerful drivers of a new role for Europe.
[1] This text was prepared for the workshop ‘Is There a Future for the Transatlantic Alliance in a Post-Western World?’ that took place on 8 April and was organised by the Prince of Asturias Chair at Georgetown University, the Elcano Royal Institute and FLAD.
