Former President Donald Trump has been chosen as the Republican Party’s official nominee for the United States’ presidential elections due to take place in November 2024. Trump’s 2016-2020 presidential term represented many foreign policy challenges for European leaders, including his tendency to pander to leaders such as Russia’s Vladimir Putin and North Korea’s Kim Jong-Un, and his withdrawal from multiple international agreements, including the Paris Agreement and the Iran Nuclear Deal. European leaders are beginning to prepare for the scenario of a second Trump term, should he be re-elected. This Just the Facts looks at some of the potential impacts and consequences Trump 2.0 could have for the EU.
Nominations timeline
On 15 July, at the 2024 Republican National Convention in Milwaukee, the Republican Party formally nominated former president Donald Trump as its nominee for the United States presidential election on 5 November. This marks the third time that Trump has been selected as the GOP’s presidential nominee, a first in the Republican Party’s history. Another first is that Trump is the first presidential nominee who is also a convicted criminal. On the same day, Trump announced that his choice for the GOP nomination for Vice-President was Ohio Senator and best-selling author of “Hillbilly Elegy”, J.D. Vance. Trump’s nomination came just two days after he was the target of an assassination attempt at a Pennsylvania rally (13 July) where he received a bullet wound to the ear while he was speaking on stage. Following Joe Biden’s announcement shortly after that he would no longer be running in the November election, the Democratic Party confirmed (6 August) Vice President Kamala Harris and Governor Tim Walz as the Democratic Party’s nominees for President and Vice President.
Before Biden withdrew from the race, polls showed Biden trailing Trump consistently this year. However, since Harris’ nomination was announced, she has turned around national polls which show her gaining ground with a 4 percent lead over Trump as of 11 August.
NATO
A predominant concern for European leaders when considering the possibility of a second Trump presidency is the potential implications for security and defence, specifically regarding NATO. The 75-year-old NATO alliance has ensured European security since the end of World War II. Trump reportedly discussed withdrawing the US from NATO several times throughout his first term, and if re-elected, will likely significantly reduce the US’s involvement.
As a preventative measure regarding a US NATO withdrawal, the US Congress passed the US National Defence Authorization Act in December 2023, which included regulations requiring an act of Congress or approval by two thirds of the US Senate for any suspension, termination or total withdrawal from the alliance.
Some observers are noting that an outright withdrawal from the alliance is unlikely, with most former Trump officials appearing to believe that the alliance should be preserved. However, it is apparent that Trump’s emerging NATO policy points towards a weakened commitment to the alliance. Think tanks such as the pro-Trump Centre for Renewing America have called for a “Dormant NATO” whereby the US takes a more detached approach. This vision would see the US playing a significantly downsized security role and thus, shifting from a being the primary provider of military capacity in Europe, to provider only in times of crisis.
Another potential element of Trump’s NATO policy, as put forward by senior former Trump security official Army Lt. Gen. Keith Kellogg, is a two-tiered system whereby NATO members that have not yet met the target of spending 2% of GDP on defence would have their Article 5 protections removed. The NATO guideline for members’ defence spending is 2% of GDP which was agreed in 2014 after the Russian annexation of Crimea. Portugal, Italy, Belgium, Luxembourg, Slovenia, and Spain are the EU countries that do not yet meet the 2% GDP expenditure target (2024 estimated figures) on defence spending.
Ukraine
Importantly, Trump has not publicly detailed any foreign policies for Ukraine. However, according to Trump-aligned national security experts, Trump is contemplating a deal whereby NATO commits to no further eastward expansion, more specifically into Ukraine and Georgia, followed by negotiations with Russian President Vladimir Putin over how much Ukrainian territory Moscow can keep. Reports have emerged in recent months that, according to Trump’s tentative plans, this territory would include Crimea and the Donbas region. A quote from a GOP representative, Don Bacon, displays elements of Trump’s transactional approach to foreign policy when it comes to Ukraine. Bacon said that, during a meeting with House Speaker Mike Johnson during his visit to Capitol Hill, Trump was dismissive of Kyiv’s goal of driving out Russian troops and appeared only to be concerned with how a Ukraine victory would benefit US interests: “He’s like, if Ukraine wins, what will be the benefit?”
Additionally, Trump’s choice of running mate in J.D Vance has been a cause for concern for European leaders in relation to Ukraine. Throughout his campaign, Vance has voiced strong opposition to using more funds to provide military aid to Ukraine. Earlier this year, he played a central role in the effort to do away with a Ukrainian aid bill in the Senate, which was finally passed in April.
Eurozone
According to Goldman Sachs economists, a Trump re-election could pose “a significant downside risk to [the] otherwise constructive growth forecast for the Euro area”. The economists released baseline estimates projecting a 1% GDP hit and a 0.1pp lift to inflation as a result of Trump’s projected trade policy, increased defence and security pressures, and US domestic policies.
During Trump’s last term, trade tensions between the US and the EU increased due to the US imposed tariffs on European steel (25%) and aluminium (10%), and the retaliatory EU imposed tariffs on a variety of US goods. Under Biden’s administration, both the US and EU’s tariffs have been suspended until March 2025 following the presidential election.
Were Trump to win, he has pledged to impose a blanket 10% tariff imports to the US, including those from Europe, furthering the trade policy uncertainty marked by his previous term. In 2018 and 2019, this uncertainty reduced industrial production in the euro area by approximately 2%. EU officials estimate that, if Trump were to impose this 10% minimum tariff in reality that EU exports could consequently decrease €150bn annually (2024 onwards).
Another potential impact is Trump’s endorsement of cryptocurrencies. In July, Trump addressed the 2024 Bitcoin Conference vowing that, with his re-election, the US would be the “crypto capital of the planet and the bitcoin superpower of the world”. He said that he would create a strategic bitcoin reserve in the US. A major bitcoin resurgence would create challenges for European policy makers, who have only recently begun regulating for cryptocurrencies, and could even pose a threat to the euro, with a higher issuance of USD-pegged stablecoins .
Energy
During his campaign, Trump has repeatedly expressed opposition to the Biden Administration’s signature climate initiative aimed at accelerating the clean energy transition, the Inflation Reduction Act (IRA). If a Trump presidency were to do away with the IRA, European clean tech firms have said that this would result in possible negative impacts, including low-carbon investments and clean energy incentives. Due to this uncertainty around US funding, some companies are reported to be abandoning expansion plans, with companies such as the German SMA Solar and Thyssenkrupp Nucera reporting delays in their US projects. Other companies such as Norway’s Nel remain cautious and are yet to make final investment decisions for US sites, reflecting broader concerns about political uncertainty affecting European companies. Wood Mackenzie energy data and analytics company estimates that $1 trillion in low-carbon investments could be at risk by 2050 in the event of a second Trump presidency.
Is Europe ready?
On 2 August, the Financial Times wrote that the office of the European Commission’s secretary-general has “set up a dedicated team of officials to prepare for the potential return of Donald Trump to the White House”. This team are reportedly discussing the areas where the EU needs to direct the most focus, including developing communication plans in the event that EU taxpayers may need to potentially contribute more to Ukraine’s defence spending. The work of this team is intended to be “ramped up” in September, including an increase in outreach to EU governments to share insights on potential plans of action if Trump is re-elected.
Regarding defence, European economies and military budgets are quite a number of years away from being able to substitute any US departure from NATO, even with 23 out of 32 NATO members meeting defence-spending goals. European leaders within NATO have said that they want to “institutionalise” support for Ukraine within the alliance. This commitment was visible in the €40 billion financial assistance to Ukraine, but also in the decision to establish the NATO Security Assistance and Training for Ukraine (NSATU) to coordinate the provision of military equipment and training for Ukraine by Allies and partners.
In terms of industry and trade, the EU is reportedly preparing a “two-step trade strategy”, with the EU Commissioner for Trade, Valdis Dombrovskis, calling for a “co-operative approach”. The two-step strategy would involve EU negotiators approaching a potential Trump team, before he takes office, to discuss which US products the EU could buy in bigger quantities. However, if such talks to improve trans-Atlantic trade relations fail, the European Commission’s trade department is reportedly drawing up lists of imports it could charge with tariffs of 50% or more.
So, is Europe ready for Trump 2.0? The real question is can anyone really prepare for a US President as unpredictable Donald Trump? The answer is that this time around, Europe is not in denial about the possibility of his election and is getting into gear to prepare as much as is possible.