Trump Presidency Impact for U.S.-EU Relations: What to Watch

Executive Summary

• More volatile transatlantic ties: Relatively friendly transatlantic relations under President Joe Biden will give way to more volatile relations under President-elect Donald Trump. European leaders are keen to find ways of keeping the new U.S. administration engaged, especially on NATO and Ukraine where American support remains paramount.
• Trade tensions to rise: Trump has made it clear he is not afraid of levying tariffs against European allies to achieve certain economic or political goals. The EU has been preparing for this scenario and while Brussels is open to responding in kind, the focus will initially be on finding a negotiated solution with Washington to avoid a tit-for-tat trade spat. Such options may include European commitments to purchasing more U.S.-produced LNG gas, agricultural goods, and defense equipment, or promising alignment on a tougher China policy.
• Fallout on Europe: European leaders will attempt to stay closely aligned during this testing time. We anticipate that in the coming months, we will see intensified debates over how to increase European defense spending and economic competitiveness. But with political turmoil in both Germany and France, there is currently a leadership vacuum in the EU. As Trump-friendly far-right leaders like Hungary’s Prime Minister Viktor Orban may feel more emboldened to block certain EU decisions or reform initiatives, keeping the EU member states on the same page may become even more challenging.

Initial Reactions from Europe 

European governments had been quietly preparing for Trump’s potential return to the White House for months. As part of this exercise, they reached out to top advisors in the Trump orbit, seeking to better understand Trump’s policy priorities and make diplomatic inroads with his team.

Following Trump’s decisive election win, European leaders were quick to congratulate the new President-elect. Initial phone conversations between President-elect Trump and European leaders overwhelmingly struck a positive tone. French President Emmanuel Macron, who already knows Trump well from his first term in office, stressed with Trump the importance of working together “to face common challenge” and the two pledged to stay in close touch. Similarly, European Commission President Ursula von der Leyen praised her “excellent” phone call with Trump which covered defense and Ukraine, trade, and energy.

The EU has expressed strong interest in pursuing a positive agenda with the incoming U.S. administration. To this end, Brussels is currently fine-tuning proposals to engage Trump on security and defense, economy and trade, technology, and China. While European leaders are privately concerned that Trump’s election will upend the status quo in transatlantic relations in several crucial areas, Europe’s strong dependence on continued U.S. support for NATO and Ukraine means they will likely seek a fine balance with the Trump administration to avoid a rift in the relationship.

European leaders hope to stay unified in the face of potential policy shifts from Washington but doing so may be challenging given Europe’s own fragile political situation. Ongoing discussions in the EU about how to increase economic competitiveness and industrial policy aligned with the recommendations in the recent report by former Italian Prime Minister Mario Draghi will intensify. However, finding agreement on far-reaching steps will still prove challenging. Far-right leaders such as Hungary’s Prime Minister Viktor Orban, a strong Trump backer, may feel emboldened by Trump’s win. Maintaining unity on issues like EU reform or Russia sanctions could become even harder as a result.

In addition to the continent’s struggles with a stagnating economy and the ongoing war in Ukraine, a collapsing German government coalition has triggered new federal elections in late February and France’s Macron is in a weakened position after snap elections earlier in the year. As President von de Leyen attempts to hold the EU together, lack of political leadership in key member states would make it harder to respond to potential disruption in U.S. policy.

Top Issues to Watch

Diplomatic Relations

Trump’s return to the White House in 2025 is expected to mark a sharp departure from the Biden administration’s relatively friendly approach to engaging with Europe. Trump’s approach will be more transactional and less values-driven, not shying away from pressuring European countries when he thinks it is in his interest to do so. Washington may also shift the focus of its diplomatic engagement in Europe. Whereas Biden maintained close ties with key European capitals, Trump is openly skeptical of the EU and critical of Germany.

A committed transatlanticist, President von der Leyen will attempt to get along with Trump, promising economic opportunities and a tougher approach to China. A possible new German government early next year could provide a chance for a fresh start between new administrations in Washington and Berlin. President Macron will continue to position himself as a leader in managing Trump, drawing on his experience during Trump’s first term in office, but his role has been weakened. Trump is also likely to engage more with far-right or populist leaders, like Hungary’s Orban and Italy’s Prime Minister Giorgia Meloni, who could potentially emerge as key interlocutors.

Some of the early national security appointments made by Trump, such as Mike Waltz as National Security Advisor and Marco Rubio as Secretary of State, are seen by European capitals as mostly reassuring, as they are both viewed as serious politicians who are committed to working with U.S. allies to address common geopolitical challenges. However, the appointments of Fox News presenter Pete Hegseth as Secretary of Defense and former Congresswoman Tulsi Gabbard as Director of National Intelligence have already raised quite a few eyebrows across the Atlantic.

Trade

Trump’s election is likely to make U.S.-EU trade relations far more volatile and unpredictable. Trump and his trade advisors — like former U.S. Trade Representative Robert Lighthizer who may take on the role of ‘trade czar’ — have repeatedly spoken about their desire to impose sweeping 10-20% tariffs on goods imported into the U.S. in an effort to reshape the global trading system. While a key focus of Trump’s trade policy will be addressing China, he will not shy away from utilizing new tariffs on the EU given his longstanding concerns about the U.S. bilateral trade deficit, or to push for more favorable terms for American companies in Europe. Such tariffs and pressure to decouple from China will further strain an already fragile European economy.

Initially, the new Trump administration is likely to take a more targeted and sector-specific approach towards Europe, using the threat of tariffs on goods as leverage and gradually increase pressure if deemed necessary. An early test will be whether the EU moves forward with imposing tariffs against the U.S. following the upcoming March 2025 deadline for the truce over the steel and aluminum tariffs originally introduced by Trump but suspended by Biden while the two sides negotiate a more permanent solution.

The EU is also strategizing its response to the potential new Trump tariffs. While the EU has responded with tariffs in kind in the past, von der Leyen is keen to avoid a tit-for-tat trade war that can further damage the European economy and negatively spill over into the broader transatlantic agenda at a crucial time. The EU hopes to find a negotiated solution with Washington early on to avoid a back-and-forth trade spat. As a part of such a deal, the EU may offer to purchase more U.S.-produced liquified natural gas (LNG), agricultural goods, and defense equipment.

The EU will also pledge to cooperate more closely with the Trump administration on China, including on economic security issues such as technology export control restrictions where the EU is also seeking to do more itself. As the EU has developed its own China de-risking strategy and recently imposed tariffs on Chinese EVs, it hopes that it can find common ground with the new U.S. administration while also avoiding a separate trade war with Beijing. This may increase tensions between EU member states who want to align with Washington and those who seek to hedge more against U.S. pressure by reinforcing trade ties with Beijing, thus making maintaining a coherent EU China strategy more difficult. If Trump proceeds with even higher tariffs on Chinese goods, it could encourage China to dump more goods elsewhere, thus outcompeting European companies and further raising their concerns about Chinese industrial overcapacity.

The EU is also planning to offer a revamp of the U.S.-EU Trade and Technology Council (TTC), established during the Biden administration, with a stronger focus on economic security. However, it is too early to say whether the new U.S. administration will want to continue bilateral engagement with the EU in its current format, which they view is an inefficient mode for substantial outcomes. However, as Trump pursues a deregulatory agenda and withdraws climate protections at home, transatlantic regulatory divergence is expected to grow. Trump is also likely to balk at EU regulations such as deforestation and carbon border adjustment tax or digital taxes perceived as targeting American companies and will not back away from retaliating against the EU.

The Trump administration will also resort to a more assertive use of sanctions. It could impose more sanctions on Russian gas production, forcing the EU to cut imports of Russian gas and encouraging Europe to buy more LNG from the U.S., something von der Leyen has already expressed openness to. However, the Trump administration is also likely to shift the sanctions focus from Russia to Iran and China which would put pressure on Europeans to follow suit.

Security and the Ukraine conflict 

Given Biden’s efforts to strengthen NATO and lead a coalition of allies to support Ukraine to defend itself against Russia’s invasion, there are widespread concerns in European capitals that Trump’s election could undermine these efforts.

Trump’s commitment to NATO remains uncertain given his many critical comments about the alliance in the past. NATO’s new Secretary General, former Dutch Prime Minister Mark Rutte, who knows Trump and has navigated relations with him in the past, will seek to reassure Trump that European allies will increase their defense spending. Trump may well push for increasing the minimum spending requirement in NATO from the current 2% to over 3%, which would put pressure on many allies who already struggle with difficult fiscal realities. The European Commission has already announced plans to redirect billions of euros in existing cohesion funds towards defense and the idea of establishing a new common borrowing fund for defense looks more probable today.

On Ukraine, it is not yet clear what approach the new U.S. administration will take. Whereas some advisors to Trump favor continued support for Ukraine, others want to see an immediate ceasefire without support for Ukraine to defend itself against future Russian assault. Trump has made it clear he is skeptical of continuing to supply military aid to Kyiv and favors a negotiated end to the war. However, there are many unresolved questions about terms of such an agreement and what kind of security guarantees, if any, Ukraine could get in exchange. Ukrainian President Volodymyr Zelenskyy remains adamant he will not agree to territorial concessions, but in the absence of U.S. support he may not have a choice. Meanwhile, Trump will likely expect that European allies provide for the bulk of post-war security and economic assistance to Ukraine. At the same time, Trump may be less concerned than Biden about Russia’s redlines and escalation risks, and may seek to use military assistance to Ukraine as leverage to draw Russian President Vladimir Putin to the negotiation table.

Trump’s new national security advisors are generally seen as hawkish against Russia and concerned about Russia-Iran links, but skeptical of supporting Ukraine. Incoming National Security Advisor Waltz was quoted earlier this year saying, “it’s time for allies to invest in their own security” and that U.S. taxpayers had footed “the bill for far too long.” Trump’s nominee for Secretary of Defense, Fox News host Pete Hegseth, is a surprising pick for many European allies who worry about the U.S.’s ability to manage multiple complex geopolitical crises simultaneously in Europe, the Middle East, and the Indo-Pacific.

Appendix

Key Trump administration appointments with relevance for Europe:

• Marco Rubio, Nominee for Secretary of State

• Mike Waltz, National Security Advisor

• Pete Hegseth, Nominee for Secretary of Defense

• Elise Stefanik, Nominee for Ambassador to the United Nations

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