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Analysis
What Trump’s 2025 Return Means for US-Europe Relations and the Global Order
Overview
The 2024 election saw Donald Trump win the presidency with 312 electoral votes and 50.4% of the popular vote, defeating Kamala Harris, largely because nearly 8 million who had voted for Biden stayed home. Key issues such as economic dissatisfaction, including concerns about inflation heavily influenced the outcome. Geopolitically, Trump’s "America First" approach will reshape U.S. global relations, emphasizing transactional policies and reduced international cooperation. His policies will likely include significant fiscal stimulation (helped by Biden-era bills that are only now paying out as well as new tax cuts), fossil fuel expansion, and tariff-driven trade strategies, creating potential challenges for US-EU relations and global institutions.
Economic dissatisfaction
Economic dissatisfaction, particularly around issues like inflation and financial security, significantly hurt Harris's campaign and benefited Trump. The Biden administration’s inability to address rising costs became a major weakness, with many voters feeling that the Democratic Party did not provide adequate solutions to improve their financial situation.
- According to data, 70% of voters who thought the economy was in a poor state voted for Trump. Only 28% of these economically dissatisfied voters supported Harris.
- Many voters felt that their financial situation had worsened under the Biden administration: 46% believed they were worse off financially, and of this group, 81% voted for Trump.
- 80% of voters who considered the economy their most important issue voted for Trump.
Additionally, the Biden administration's spending initiatives, totaling $1.6 trillion, will be largely felt under the upcoming Trump administration, as most of the funding has yet to be fully implemented. This legacy includes four major bills: the 2021 Pandemic Relief, the 2021 Bipartisan Infrastructure Bill, the 2022 CHIPS and Science Act, and the 2022 Inflation Reduction Act. Together, these bills comprise $1.1 trillion in new spending and $525 billion in tax relief. However, only $125 billion has been spent so far, meaning the bulk of the stimulus will take effect in the next few years.
Things Left Unsaid: Trump’s re-election will re-surface many polarizing issues, where his concerns over “fake news” could curtail freedom of expression; where professional civil servants are labeled as “the enemy within;” where the rise of white Christian nationalism fuels debates over abortion, gender identity and LGBTQ+ rights; and where immigrants can be rounded up and deported, as with “Operation Wetback” during the 1950s. These issues too affect the business and investment climate in the United States, but are not the subject of today’s discussion.
Geopolitics
- Trump's worldview is defined by a belief that other nations take advantage of the US, although it’s unclear how the world’s most powerful nation could be so victimized.
- The rule of law would become secondary to power politics, with Trump signaling that he's willing to break established norms and laws to further U.S. interests. His "America First" stance would likely lead to a disengagement from global institutions like the UN, and a more transactional approach to organizations like the G7 and G20, where he would demand America's interests be prioritized.
- In Europe, Trump would push for NATO allies to spend more on defense and expect the EU to take greater responsibility for issues like Ukraine.
- His relationship with Russia and China might become easier, as he would not have the focus on human rights that often strains these relations, and he would likely prioritize trade and strategic gains over universal values.
- Trump's stance on international agreements would be that they are only valuable if they serve U.S. interests, as seen in his renegotiation of NAFTA and his broader disregard for international law when it conflicts with his goals.
Fiscal Policy, Sugar Highs and Trade Policy Issues
Domestically, Trump will take advantage of the billions of dollars of infrastructure spending agreed during the Biden term, and will couple this with numerous , tax reductions that will lead to a significant fiscal stimulus (and expansion of the national debt), resulting in a “sugar high” for the economy.
He is also expected to exit the Paris Climate Agreement, expand fossil fuel production (where the United States is already the leading oil and gas producer and exporter), and cut electric vehicle subsidies, while championing nuclear power. On external economic policy, Trump proposed imposing new tariffs globally at a 10% or 20% level, as well as at 60% for all imports from China. He can also be expected to further push on the European Union, whose $200 billion trade surplus with the United States is second only to China and indeed worse than during his first term. Unfortunately, the failure to resolve many old trade issues during Biden’s term (steel and aluminum, Boeing-Airbus and agriculture) means these wounds will be quickly re-opened, even as problems from Biden’s own policies (tax rebates only for EVs largely made in America and other procurement preferences) continue to fester. And new irritants are sure to come, especially through enforcement of the EU’s Digital Services Act and Digital Markets Act, a possible ECJ ruling against the new US-EU Data Privacy Framework, and the likely escalation of the trade war with China.
A European Response: European Governments Can/Should
- Europe should adopt a more assertive stance, avoiding flattery and instead focus on interest-driven politics.
- Europe should prioritize its own competitiveness, forge coalitions with mid-level powers like Japan, Canada, and Mexico, and leverage its new economic defense tools, including traditional trade defense instruments, the International Procurement Instrument, the Anti-Coercion Instrument and the Foreign Subsidies Regulation.
What businesses can do
- Build business coalitions to convince U.S. politicians and policy makers that the transatlantic economic relationship is based on huge two-way investments (by end 2023, U.S. firms had $3.9 trillion invested in Europe while European firms had invested $3.5 trillion in the United States; for U.S.-EU, these numbers are $2.6 and $2.4 trillion respectively) and intra-firm trade; targeting imports from Europe only weakens the global competitiveness of U.S. and European companies and workers alike;
- Push European as well as U.S. policymakers to base policy decisions on private sector economics rather than ideology.
Conclusion
Donald Trump’s 2024 election victory marks a pivotal shift in U.S. domestic and global policies, driven by economic dissatisfaction and declining Democratic voter turnout. His "America First" agenda will reshape trade, geopolitics, and transatlantic relations, with significant implications for Europe and the global order. It will be important for companies to anticipate and prepare themselves to identify both the opportunities and challenges this will trigger for their business . FIPRA and its Network stands ready to help.
Written by our special advisor Peter Chase with contributions from Marina Sahelices Carrasco
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