Donald Trump’s dangerous advocacy for an end to the ongoing Russia-Ukraine war has surprised and alarmed our European allies. His economic policies are deepening the storm as he begins his second term. In the first 100 days, European leaders have experienced growing uncertainty, particularly regarding trade relations and the implications of Russia’s military actions in Ukraine. The European Union’s foreign policy chief, Kaja Kallas, described this period as “very intense” and “disruptive” for the EU, highlighting the unpredictability that characterizes Trump’s current administration.
Kallas echoed these worries in an interview with CNBC. She stressed that aside from the unpredictability of Trump’s upcoming tariff policies and foreign policy, that is the biggest threat for European countries. This triangulation of alliances and interests, she said, has caused a geopolitical world that is very different than the last several years. “It’s unlike anything else we’ve seen before from the U.S. administration,” Kallas remarked, underscoring the unique pressures facing the EU.
Beyond the political implications of Trump’s policies, Europe is preparing for an economic backlash. The previous president stuffed American businesses with a 20% blanket obligation on U.S. exports to the European Union. This ruling has already created apprehension over an increase in trade hostilities. Trump has announced a temporary suspension of these tariffs to help facilitate negotiations. On a parallel track, Kallas announced that the EU had developed its own counter-measures, which are now in abeyance.
The ramifications of these escalating trade tensions go beyond near-term economic effects. At the European Central Bank, policymakers are concerned about the “noise” created by Trump’s actions. They argue that it would suppress growth and contribute to new inflationary pressures. Klaas Knot, president of the Netherlands Bank, emphasized this point when he stated, “In the short run, it’s crystal clear that the uncertainty that is created by the unpredictability of the tariff actions by the U.S. government works as a strong negative factor for growth.” Robert Holzmann, governor of Austria’s central bank, noted, “We have not seen this uncertainty now for years.”
As Europe copes with this challenging moment, EU leaders are concentrated on continuing to respond to Russia’s aggression in Ukraine. Kallas urged for increased pressure on Russia to foster a desire for peace, reiterating that the EU and its members have “supported Ukraine more than anybody else.” She firmly stated, “International law is very clear: Crimea is Ukraine,” reinforcing the EU’s stance on territorial integrity.
The larger effects of trade tensions sparked by the trade war unleashed by Trump’s policies will affect EU economic growth in uncertain ways. Holzmann asserted, “Unless the uncertainty subsides, by the right decisions, we will have to hold back a number of our decisions, and hence, we don’t know yet in what direction monetary policy should be best moved.” European leaders are now more concerned about what to do in the aftermath of trade disruption. At the same time, they face unprecedented geopolitical challenges that call for a smarter response.
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