Democrat or Republican? Either way, Europe will need to respond to Washington’s shift

Even before President Joe Biden’s decision to withdraw from the race, the US presidential election on 5 November was the global political event of the year, casting its shadow far into Europe.

The substantial differences between the candidates in content and style, and thus their impacts on Europe’s security and prosperity, are indisputable.

However, it is often overlooked that massive strategic changes in US politics are underway regardless of the election outcome. Or in other words, Donald Trump is less the driver of this change and more its symptom.

Given this realisation, the need for Europe’s strategic response changes. We should not look at the election outcome like a rabbit at a snake, hoping for a favourable result.

Instead, we must independently and quickly define and represent our own goals, regardless of the election.

Washington to shift its focus?

Several fundamental developments indicate this significant change in the US. The country is in the midst of shifting its focus increasingly towards the Indo-Pacific region.

This process began with the catchphrases of pivoting to Asia and rebalancing under Obama and was continued even more intensively by Trump.

The Biden administration views China as the greatest and most comprehensive challenge to US security.

Consequently, China will remain America’s main competitor for the foreseeable future, receiving corresponding and increasing attention. US demands for other parts of the world to choose sides in this competition will grow louder.

Economic policy changes are also evident. The Inflation Reduction Act (IRA) is a particularly visible sign. The tariffs on steel and aluminium introduced by the Trump administration were not one-off exceptions from a rules-based order based on the World Trade Organization.

The decision that European car manufacturers will not benefit from generous premiums for electric cars in the US starkly shows the strain on transatlantic cooperation.

There is a risk of competition between Europe and the US, with both sides trying to attract investments based on government subsidies.

What should Europe do?

From this description, essential implications for Europe follow. First, Europe must increase spending on security and defence. This step not only strengthens Europe’s own capabilities but also increases the likelihood of American support by countering Trump’s recurring accusations against supposed European freeloaders.

This strengthening should urgently include greater cooperation among the few European states with significant defence industries, creating a European innovation system that could also benefit the civilian sector.

Second, larger European capital markets and strengthening the euro as a global reserve currency are needed.

This would improve the financing of innovation and growth in Europe and enhance its weight in international capital markets, increasing Europe’s independence and strategic freedoms.

Europe does not have a capital problem but a capital allocation problem. The integration of European capital markets would be a quintessential step to overcome this problem.

Third, comprehensive trade agreements with other parts of the world, such as the Mercosur agreement, are necessary. Diversifying supply and sales markets strengthens Europe’s strategic freedom and promotes economic growth.

The US remains Europe’s most important ally in many ways, especially through NATO. Therefore, there can be no equidistance in Europe’s relationship with China and the US.

However, Europe’s interests do not fully align with those of Washington, regardless of the US presidential election outcome. Europe should recognise this and draw the right conclusions.

Jörg Rocholl is President of the European School of Management and Technology (ESMT) Berlin.

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