With the days ticking down to the US presidential election on 3 November, European lawmakers, business leaders, and financial analysts are weighing the implications of a Joe Biden victory versus a second term for Donald Trump on the US-EU relationship.
As UBS pointed out in its September report: “Most national elections are not global events, but the US election is one exception.”
“The less multilateral approach adopted by the US to tackling the world’s problems, from trade to geopolitics, has left Europe somewhat isolated,” UBS said. “Whatever path the US decides to take in the future will likely have important ramifications for US-Europe relations and their respective economic progress.”
The world’s largest wealth manager noted that the US election will have an effect on eurozone trade, since the US is the euro area’s single most important trading partner and accounts for 14% of all its exports.
Trump has repeatedly threatened to set punitive tariffs on European car exports, something deeply concerning especially for Germany’s powerful automotive sector. In 2018, he slapped duties of 25% on steel imports and 10% on aluminium.
If Trump were to win, “US-EU trade tensions will likely remain, but increased tariffs are unlikely in the near term,” UBS says, and he “is likely to keep pressure on the EU to support NATO” and be “less willing to work with Europe to engage with China.”
Ultimately, it could lead to increased fragmentation in global trade, the bank said.
If Biden wins, UBS believes it could lead to the easing of trade tensions, with steel tariffs potentially being reversed and threats towards the EU auto industry abating.
“However, the positive economic benefit of this [a Biden win] would be marginal, in our view,” UBS said “Swift progress toward a US-EU trade deal appears unlikely.”
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A fractious four years
Donald Trump has had a combative relationship with many EU countries since taking office in 2017.
He has trained much of his ire on Germany and its leader chancellor Angela Merkel, criticising her for a broad range of things: from her decision to accept refugees fleeing the Syrian war, to Germany’s insufficient NATO contributions.
The president has threatened to curtail intelligence sharing over Germany’s refusal to ban Chinese telecoms company Huawei from its 5G network auctions. Most recently, the US has started slapping sanctions on companies working on the Nord Stream 2 gas pipeline from Russia to Germany.
In response, Merkel has said repeatedly that the EU could no longer rely on the US for protection as it had done in the past, but must strengthen itself and find its own path.
In her Harvard University commencement speech in May, Merkel urged students to stand up against protectionism and nationalism, tear down “walls of ignorance,” and to “never describe lies as truth and truth as lies.” She did not mention Trump by name.
A broken relationship
German politicians have been vocal about the fact that under Trump, the transatlantic relationship has shattered.
Norbert Röttgen, the chairman of the Bundestag’s foreign affairs committee, told Politico recently that future cooperation between the US and Europe would be tough if Trump wins a second term.
“The current American administration is driven by a logic of punishment whenever others do not abide,” Röttgen told Politico’s Matthew Karnitschnig. “It isn’t possible to build a partnership on this basis.”
He added that a country that is divided and marked by acrimony “will at some point lose the ability to shape foreign affairs, so we’d see the American retreat from international politics continue, creating a vacuum that others would be more than happy to fill.”
A Trump victory could potentially kick off a full-blown trade war with Europe, which would seriously harm EU companies — the European Union ran a €153bn (£138bn, $181bn) surplus with the US in 2019.
Biden not the cure-all
Joe Biden has said a few things that sound good to European ears. He said that he would sign the US up to the Paris Climate Agreement again, after Trump withdrew from it last year.
He has also indicated he would reverse Trump’s move to cut US funding to the WHO, saying in June this year that “it is essential to coordinating the global response during a pandemic, and the United States should be leading that response as we had in the past.”
But even if the Democratic candidate were to win, the transatlantic relationship may never be what it once was.
"Everyone who thinks everything in the transatlantic partnership will be as it once was with a Democratic president underestimates the structural changes,” German foreign minister Heiko Maas told the German Press Agency in June.
"The transatlantic relations are extraordinarily important, they remain important, and we are working to ensure they have a future," Maas said. "But with the way they are now, they are no longer fulfilling the demands both sides have of them."
Former vice-chancellor Sigmar Gabriel agrees. He said recently that the old partnership is "irrevocably over, no matter who becomes president,” as the US "is becoming more Pacific and less European.”
Hans Kundnani, a senior research fellow in the Europe Programme at Chatham House, likewise argues that the relationship between the US and Europe was faulty even before Trump came along.
“The tendency among Atlanticists to idealise US policy towards Europe before Trump entered the White House obscures the pressures on the transatlantic relationship that were already evident prior to his run for the presidency in 2016,” Kundnani says in his analysis.
He notes that the US’s increasing focus on China has meant Europe has come under growing pressure to take more responsibility for its own security.
Kundnani says that even if Trump gets re-elected in November, “Europeans are unlikely to achieve ‘strategic autonomy’ but could in fact be more splintered, with France and like-minded member states pushing to create defence initiatives within the EU “while others such as Poland look to further bilateralise their security relationship with the US.”
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