In addition, Washington has also undertaken economic policy changes, notably with the Inflation Reduction Act (IRA). The Trump administration’s steel and aluminum tariffs were not one-off exceptions to a rules-based decree. And the Biden administration’s decision not to extend generous discounts to European automakers for electric vehicles to the United States highlights the strain on transatlantic cooperation.
Based on what is known of Harris’s economic policy at this stage, this approach is unlikely to change if she were to become president. Whatever the outcome of the election, there is therefore a real risk that competition between Europe and the US will intensify, with both sides trying to attract investment through protectionist instruments, thereby jeopardising the benefits of free trade and investment.
Now that these developments have been achieved, they will have several essential implications for Europe:
First, the EU must increase its spending on security and defence. This would not only strengthen Europe’s capabilities, but also the likelihood of securing US support in times of crisis, countering the recurring accusation of “European free riders”. It would also be imperative that this strengthening be accompanied by greater cooperation between the few European countries with significant defence industries, thus creating a European system that could benefit the civilian sector through innovation and economic growth.
Second, Europe needs bigger capital markets and a stronger euro as the world’s reserve currency. This would improve the financing of innovation and growth in Europe, while strengthening the continent’s weight in international capital markets, improving its independence and strategic freedom. Europe does not have a capital problem, but it does have a capital allocation problem. And integrating European capital markets would be a key step in overcoming this problem and enabling businesses to start up and grow.
Finally, Europe needs comprehensive trade deals. Even those who initially criticized the failure of the Transatlantic Trade and Investment Partnership (TTIP) realized its potential merits when the Trump administration began imposing tariffs on steel and aluminum, and regretted their initial reservations. This mistake must not be repeated with other parts of the world, and the Mercosur deal would be an important step in the right direction.
The United States remains Europe’s most important ally in many ways, including through NATO. Therefore, Europe’s relations with China and the United States cannot be equidistant. However, regardless of the outcome of the US presidential election, Europe’s interests are not entirely aligned with those of Washington. It is time to finally acknowledge this and draw the right conclusions.
