A few months ago, I was asked by Politico EU to provide an overview of this. I would not think that Trump himself is inducing this charge. In many ways there is a fair bit of continuity from the previous administration. In any case, I spend a bit of thought to put together some paragraphs. What is now published on Politico EU, has been streamlined and improved for style and shortened. Here is the longer version with more context.
‘Trump’s era highlighted the EU’s sovereignty crisis, most visible in the digital and financial domains’
Trump was able to turn the EU into a battlefield of own contradictions, forcing a bloc that had long prided of its model of transnational cooperation to confront a brutal, adversarial reality. By unleashing tariffs, undermining the multilateral system, exploiting security and climate vulnerabilities and bilateralizing relationships, he induced the EU to open up what may turn out to be institutional Pandora’s boxes (think: industrial policy) that the EU treaties had previously kept in check for the sake of EU cohesion. The result is a weakened bargaining position, fragmenting faultlines and the temptation of national‑first rhetoric, which has pulled European parties toward hard‑right, anti‑multilateral rhetoric at a time when precisely such cooperation is more important than ever.
At the same time, Trump’s era highlighted the EU’s sovereignty crisis, most visible in the digital and financial domains. To safeguard dollar dominance, the U.S. pushes financial innovation via stablecoins supported by American‑controlled digital‑identity and AI, projecting power through its control of global finance and information infrastructures. The tools of platform control the U.S. uses to safeguard dollar dominance gives it the power to include or exclude actors at will. This could ultimately erode European autonomy over payments, data protection and the ability of democratic governance in its present form. This has left Europe scrambling over whether to align itself with an increasingly fragile U.S. economic model or a “more” Chinese model that may offer more autonomy but may come at the expense of a shrunken industrial base and is threatening in many other dimensions as it may lead to the further spread and proliferation of surveillance authoritarianism, especially in the global south.
There is a third path, though: the EU can forge its own self‑contained technological and financial pathways, which would demand much deeper integration of the single market, with a shared defense build‑up, the mutualization of sovereign risk and accepting the euro’s internationalization.
The single market integration will lead to scale economies and can lead to marked reduction of bureaucratic barriers with the immediate benefactors being the nascent EU tech sectors. A weakened reliance on third countries for mobile capital through a proper borderless digital pan-European company regime will increase talent retention and encourage a maturing of healthy talent pipelines.
A mutualization of defense will lead to notably higher efficiencies in capabilities and, in parts, can offer an offramp for the automotive industry. This should be coupled and aligned with soft expansion of protective instruments that are aligned with shared global objectives of climate action (think: CBAM, circular economy).
A broader role of the Euro can benefit the financial sector development and the EU’s soft power. European citizens will feel more autonomy and identity with the reassurance of European values such as dignity, privacy, data protection, accountability and the rule of law being deeply encoded in a digital Europe. And in doing so, Europe can continue being a champion working pragmatically with the US, China and others to fix global institutions, especially shaping institutions around trade for the digital age and, within coalitions of the willing, to continue the fight against the climate crisis. These measures, spurred by the many escalations and the massive increase in uncertainty under Trump provides an ample opportunity due to global capital reallocation. It will make or break the emergence of a financially sovereign, mature Europe. The bloc will live up to the challenge or it will go under, with nation-states and narrow interests making a comeback. It is for Europeans to shape their own destiny.
US economic model – skewed towards services, financialisation with a hollowed out industrial base and aggravated inequality with sharp singular specialisation in information intermediation and heavy focus on hydrocarbon economic base accelerating global warming — it comes with perceived sharp increases in societal inequality, dysfunction (mass killings, suicides, crime, poor mental health), poor public good provision, low tax morale and polarization. It boosts private rentier capitalism most sharp incarnation is with dynamic and algorithmic pricing undermining core market tenets (law of one price). The US dominance is partially an artifact of the US dollar’s role that allows the exchange rate mechanism to not be operational for the US.
Chinese model with stronger emphasis on data sovereignty, and retention of domestic services (think: big tech in China with market access restrictions), a broad industrial base in manufacturing and a push to electrify everything that offers solution to the shared climate crisis. Yet, it also comes with deployment of this technology for surveillance and suppression of individual freedoms. For developing countries, the challenge is that CN offers outcomes and infrastructure, while the Western model is often slow in delivering due to focus on capacity building. Hard infrastructure beats this game easily, since it offers plenty ribbon cutting ceremonies and few “lectures”. But it may turn out to be a “shallow” form of development. The expansion of Chinese power then may entail an erosion of the chance of free societies to emerge as the surveillance technology is too attractive to ignore, especially in societies with a deep programming that may favor authoritarian styles. The exchange rate mechanism is not allowed to do its work in the Chinese case either, tax morale is equally weak and there is poor domestic
If EU aligns with US, EU still ends up getting skewered as US approach is to divide and rule and identify sufficient large “winning” coalitions intra EU.
If EU aligns more with CN, this may lead to less industrial jobs in Europe as CN manufacturing prowess to undermine EU value chains/industrial base. Similarly, CN has incentives to play divide and rule.
In either case, the EU is a target for attack of both CN and US but in long term CN will win the soft power game since they have specialized in solutions, whereas US has specialised in (worsening) the problem (in particular, climate crisis). President Donald Trump may not see the competition for “fixing the planet” as the natural direction through which a country establishes moral authority. This is problematic.
No matter what Bill Gates says it will be developing countries that will bear the burden due to non-linear tipping points as the global south has weaker institutions and so the same level of shock may lead to much faster cascade into conflict and most likely reduce the needed capital flows to build resilience.
And even if developing countries will be “resilient”, the resilience will most likely be “purchased” through a fostering of Chinese digital state surveillance techniques undermining the cause of freedom. At present the US has got its soft power advantage still working for itself in the global south, but its not clear for how much longer (think: USAID cuts etc.).
Maybe at a high level this is all part of a choreography to move to a multipolar and a reformed global governance system.