Admittedly, and as a big disclaimer to our forecasts this month, there is probably more that we don’t know than we do. How long will these tariffs really remain in place? Will we get more exemptions or even a further downscaling of US threats? Will a US recession and further stock market corrections push the Trump Administration to reverse course? How will other countries react, both in terms of retaliation, negotiation and mitigating measures?
After the Art of the Deal, will we perhaps get the Art of the Defeat?
But there is much more to the developments of the last three months. Whether we like it or not, whether we keep our eyes closed or not, or whether we try to make sense of unprecedented economic and political moves or not, the US no longer wants to hold its so-called ‘exorbitant privilege.’ The international geopolitical world order is changing.
First, it was defence and security; now, it is trade and economics. Just another historical reminder: it was the US that led the initiatives for all post-World War II multilateral institutions such as the IMF, the World Bank, NATO, and the World Trade Organisation (or better yet, its predecessor, the General Agreement on Tariffs and Trade). This created an international geopolitical world order in which one dominant power, the US, dictated the order that other countries followed.
This era seems to be over and looks set to be replaced by unilateral approaches.
The implications for the rest of the world and the global economy are hard to grasp. To bring in some historical comparison, there are two ways to see the current situation: comparable to 1989 or to the pandemic. The fall of the Berlin Wall in the late 80s changed Europe and the world for good. The pandemic was also regarded as a long-lasting structural shift to the global economy, which eventually faded away almost entirely, only a few years later (with a few exemptions, like hybrid working). The jury is still out on how long-lasting the impact of the current episode will be, but my personal view is clear.
For Europe, life in the shadow of the US is at an end. It is now up to Europe’s leaders not to lament this development but rather to work on the continent’s own ‘strategic autonomy’ and ‘exorbitant privilege’. The way to do this should be more than well-known by now.
I stood on the Berlin Wall in 1989, unaware of the long-term consequences of this historic period. Today, I am fully conscious and aware of when Europe finally decides to write a new chapter.
