How Economies Around the World Will Respond to Trump 2.0

U.S. voters have given President-elect Donald Trump a mandate to govern the United States, but his policies are certain to influence the entire world. It’s possible to speculate on the potential effects based on Trump’s first term as president. But his agenda is now more extreme, and his power less restrained.

Is Europe any more prepared than it was eight years ago to contend with a Trump presidency? What does another Trump administration mean for global climate policy? And what is China’s view on the U.S. election?

Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: There’s a lot of talk I’ve seen already about how this is a wake-up call for Europe. And it dawned on me that people have been talking about these wake-up calls now for at least eight years since Trump was first elected. Is Europe any better prepared to defend itself and its interests now? And if not—how can that be the case? What has Europe been doing in that time?

Adam Tooze: I mean, it’s such a fair question, Cam. And as you say, the wake-up call metaphor just brings home this thing—Europe’s been hitting the snooze button for decades. Literally over and over again, this message has been sounded out. Germany boasts of having raised its defense spending in the last couple of years to 2 percent of GDP, but it only gets there basically by some fancy footwork in the budget. The regular defense budget of Germany is still stuck at 1.2 percent of GDP and the rest is add-ons in the form of a special budgetary fund they created and counting money they give to Ukraine as German defense expenditure. There has not been, despite all of the rhetoric, a fundamental shift in the understanding of what defense would involve. And that would be not, you know, Germany breaking out of the existing fetters, but it would be moving defense spending to something closer to 3 percent, which would take it to 120 billion euros a year, which would be enough to give Germany the chance to rebuild the damage done to its defense capital stock through neglect over many years. It might give them a chance of hiring some people, and they could buy some new military kit and become a truly cooperative and large-scale player in the European system.

Which is where this all should go, because all together, the Europeans spend enough money, easily enough money, pushing toward 300 billion euros or more now, to provide for their own defense against Russia. But they do actually need to do it in a concerted way. And there are players in the system which are doing that. Poland, for instance, has raised its defense budget to 5 percent of GDP. Given that the Polish economy is much smaller than that of the German one, that now means that Poland’s defense spending is on a par with the regular defense budget of Germany. And that just means Germany is not even trying.

As you say, this question was really put on the table in 2017 at one of these famously dysfunctional NATO summits early on with Trump. And he really looked like he was going to storm out and break up the entire alliance. And [then-German Chancellor] Angela Merkel at the time said, “Wow, we really are going to have to stand on our two feet.” And have they actually shown under her administration—any more than under [Olaf] Scholz—any real determination from where the real money power is in Europe, namely in Berlin, to act on this? You really can’t say they have. I really have profound sympathy here with the American position, which is quite bipartisan at this point. In every respect, it’s incomprehensible that supposedly mature, sovereign European states just basically don’t provide for their own defense.

CA: To the extent that Trump has a climate policy, it consists of exiting the Paris climate accord and rolling back all regulations and laws meant to pursue climate goals. What will that mean for climate policy in a global sense?

AT: Well, the Paris climate agreements have a flexibility that’s already been tested, right, because they were signed with great brouhaha with the Obama administration very much playing a leading role in 2015. And then within a short space of time, America was exiting. They continued on, anyway. And both Europe and China gathered climate policy momentum very dramatically from 2018 onward. And the Chinese made their historic commitment to neutrality by 2060, ostentatiously before the American election, as if to say to Washington, “We do climate policy regardless of where you’re coming at this from.” Because this is China’s problem to a huge extent. This is Asia’s problem to an even bigger extent. The United States is an important factor, but it isn’t any longer the dominating factor.

So I think it’s important to say that despite the rhetoric about leadership from the Biden team, no one who’s serious about climate policy at the global level has been counting on America. Because if you look at America’s underlying interests, which now include the largest oil and gas industry in the world, why would you expect a country which has assiduously fostered that interest in that industry to be a reliable, you know, net-zero player? It’s sort of foolish to imagine that. You can, of course, from the liberal point of view in the U.S., do your best to drag America in the direction of the green-energy revolution. But there are going to be very powerful countervailing forces. And Trump very deliberately, very explicitly, articulates all of those.

The really peculiar thing is he’s now obviously best buddies with Elon Musk, the centerpiece of whose fortune is a truly important innovation in the green-energy space, which is huge in China. So maybe that weird mix of cocktail that Trump brews up will be slightly less toxic than it seems at first. Broadly speaking, I think this is a continuation of American policy, which is, as famously as [former U.S. President Barack] Obama put it, all of the above. America will do fossil, and it’ll also do green. You know, it will also do battery-powered energy. Like in Texas, it will do oil and gas, and it will do wind and solar. Why? Because America is about more, right? And so, it’ll just do more, and more, and more in that vein. And I think that’s going to be the continuity. As far as China is concerned, they’re doing the green-energy revolution because, you know, it’s a hugely innovative, important, and world-transforming technological set in which they completely dominate. And there was always something slightly quixotic—and I criticized it amply—in the exaggerated talk by the Biden people about trying to establish America as a competitor in that space. And, you know, there’s a sort of dash of realism in Trump shrugging and going, “You’ve got to be kidding.” Except, of course, Tesla’s there. And Tesla really is a big player. And so, I think it’s open-ended.

From the point of view of the climate cause as a commitment to net zero and treating climate change seriously, it’s staggering. But that’s no longer what climate politics is about. It’s about green energy at this point. So, you know, there’s a sort of ambiguous response. I mean, it surely will go down in history as a very remarkable fact that, as the election was being held, America was hit by these double hurricanes that did huge damage to large parts of the United States, which can be—in a fairly straightforward way—attributed to oceanic warming, and precipitated just vast damage. The high-side estimates are enormous—hundreds of billions of dollars in havoc. And yet climate wasn’t an issue in the election. The winning side was particularly skeptical. Among Trump supporters, I think 10 percent admit that climate is a serious issue for them, which is a kind of demonstrative “screw you” to everyone else. And I think the rest of the world has to just recognize this fact about American politics.

CA: Was China invested in this election? In the United States, this was often referred to as the most consequential election in U.S. history. Did it seem that way from China?

AT: Yeah, it’s very interesting, actually, visiting China over the summer and watching the way in which the Chinese follow American politics. It’s almost the way that a lot of Chinese men, in particular, follow European soccer. Because men’s soccer in China is notoriously bad, but they’re heavily invested in the fate and fortunes of European clubs. So there’s a sort of vicarious participation in democratic politics as if through a glass wall or something where that’s what happens there, and you watch it because it’s fascinating for political-science nerds and their own politics doesn’t yield that kind of excitement.

I actually happened to be having breakfast today with two America-watchers from China, and the consensus there was that Trump actually has a fair number of fans in China. His kind of hypermasculine, business-orientated, and brash political style goes down well with a certain Chinese audience. In fact, some folks were willing to go as far as to say that if the denizens of Webo or one of the other Chinese social media sites were fully enfranchised, China would have had a Trump the day before yesterday, and they would have made an attempt to invade Taiwan some time ago. Because if you actually unleashed the forces of populist democracy in China, it would be an awesome spectacle. So there is that kind of resonance.

Sitting more coolly and looking at this, I think the consensus is probably that there was some hope at the beginning of the Biden administration that the Biden team would walk back from the place that the Trump team had ended up in 2020. Because they’ve really traveled a long way from the beginning of the Trump administration, where Trump’s position on China was trade policy orientated, tariffs, quotas, that kind of thing, to the redefinition of the Pentagon’s mission in terms of the Chinese pacing threat, to phase one of the trade deal, to the escalation of anti-China policy on a very ideological and geopolitical kind of level in the course of 2020. And there was some hope that Biden and his team would walk America back from that. And, of course, nothing of the sort happened. In fact, what’s happened is there was a more coherent—but in the end, no less confrontational or aggressive—position from the United States. Less possibility, I think, in the end of a deal.

With Trump, I think the range of options is wider on both ends. Trump might be somebody who sponsored real and genuine confrontation. And after all, he did take phone calls from Taiwan early on in his previous presidency, which was a real shock to people in the China policy establishment. So there’s the real possibility of confrontation, but there’s also the possibility of a deal of some kind, which I don’t think was there ever with the Biden administration.

But more broadly, among the Chinese intellectual class, this confirms the shock that was extremely real in 2016, where for many years, even if you weren’t in the regime-change, liberal camp, Western-orientated Chinese intellectuals—or maybe we should just call them cosmopolitan Chinese intellectuals—took American politics extremely seriously as a normative ideal of how to do modern politics. And that was broken in 2016. And surely this outcome will only confirm just how comprehensively that vision of American power and politics has gone.