While serving at the US Treasury Department, circa 2015, I met with a Turkish counterpart regarding a banking connection to the then Syria leader, Bashar al-Assad. And I received a geography lesson. My counterpart pointed to my government issue map of Europe hanging on the wall behind me and asked where Turkey was.
Looking over my shoulder, and probably visibly wincing, I noticed that only a part of Turkey was depicted—the capital, Ankara, had not even made the cut. “We share borders with Iran, Iraq, Syria, and Greece,” my counterpart noted. “And Russia is a short boat ride away over the Black Sea. Managing one’s region is the highest priority—we first have to defend our interests close to home before we look farther afield.” Implicitly, a banking connection even to a purported adversary was the least of his concerns.
I return to this anecdote often, not only in the past several weeks as Western governments revisit over a decade of policies after Assad’s stunning ouster in early December 2024. The geography lesson is relevant for Germany. Russia’s assault on European security, the growing multipolarity of international markets, and the jolts that President-elect Donald Trump’s America will undoubtedly bring upon itself and on others, will force Germany to revisit the map after a lengthy hiatus: manage one’s region, defend interests at home. Bilateral negotiations with the United States have always been the cheaper alternative to forging European compromise—both in trade and defense. The knock-on effect of Trumpist tactics will be a growing confidence and investment in Europe.
Markets Near and Far
At the outset of the eurozone debt crisis, markets looked a lot different. The financial plumbing of the bloc was less sophisticated and certainly a lot less regulated, and markets were closer to home. For Germany and industrial Europe at the time, the single market was arguably reinforcing European production and European consumption. German counterparts often baffled US policymakers by arguing that low single digit growth was actually good—a sign that the economy was close to a steady state.
When large parts of Europe descended into crisis, however, demand cratered, and producers needed to look further afield—and quickly. It was a fortuitous moment in global trade, that the expansion of emerging markets (the original BRICs composed of Brazil, Russia, India, and China) and especially the People’s Republic proved to be the right antidote at the right time. The United States was also recovering from the financial crisis, and demand was rebounding.
German-driven globalization spun out as an unspoken reflex against regional crisis. Although trade surpluses perennially concerned foreign policymakers and economists, German export expansion into global markets (including the US) was welcomed by Washington, where many worried that an economic downturn in Germany could refract back over the Atlantic. Production expanded into a seemingly insatiable Chinese market, subsidizing domestic production and employment in Germany at relatively uncompetitive conditions, effectively allowing manufacturers to outsource without outsourcing employment. The European map, embroiled in IMF-led assistance programs, faded from view.
End of the Gold Rush
The gold rush has now ended. Chinese domestic subsidization of innovation and production, intellectual property theft, and mandatory joint ventures with foreign firms have evaporated an extraordinary advantage that Western economies enjoyed for over a decade. As external demand slows, Germany is starting to get a taste of the deindustrialization that has fueled an American withdrawal from trade expansion.
The US has introduced waves of subsidization, tax rebates, and import-export controls, and under Trump come January 20, will almost certainly pursue some form of a tariff agenda. Ignoring obvious rhetorical differences, Germany is becoming a little more American in its industrial struggles, while America is becoming a little more European with a new taste for protectionism.
It is unclear what the coming years in US policy will bring—so beware all soothsayers. The first Trump administration produced a bipartisan consensus on China and began to address domestic economic concerns that carried through the Biden years However, incongruities and contradictions from the last round will now reemerge on overdrive, leaving room for European maneuver. A national panic in Germany over US tariffs feeds into American leverage when many firms may in fact be less worried about price hikes than they hope to benefit from deregulation in the financial sector and corporate tax reductions for their subsidiaries.
At the same time, Russia’s war in Ukraine has tipped the scales in handling Trumpist gripes over energy and defense. Although US counterparts may not be eager to admit it, impediments to increasing liquefied natural gas (LNG) sales to Europe lie with US permitting and shipping problems, not a lack of European demand. And European procurement agencies would be more interested in US military kit if the wait times were measured in years instead of decades.
Home Turf Wars
The European Union has (with some notable national exceptions) just celebrated the conclusion of a new trade agreement with Mercosur. Other recent additions include New Zealand, Canada, and Vietnam. The EU manages by far the greatest number of formal trade agreements globally, which by some measure speaks to the prowess of its negotiators and to the fundamental attractiveness of its marketplace, despite all the bumps in the road.
However, growth generation does not always ripen the longer contractual ink is on the paper. Yes, greater market access for an export-dependent bloc is certainly a net positive, yet no politician or newspaper has wasted a moment recently in bemoaning the EU’s purported post-pandemic competitiveness crisis. This raises an unholy question: How long is the runway for traditional-style trading arrangements for national pocketbooks, really, and might they also contribute to complacency over the need for innovation and investment?
The expediency of American and Chinese pressure will forge a hard-won path among 27 EU member states forced to make amends that extend beyond the scope of their traditional national interest. In Berlin, stakeholders often complain about being squeezed between the world’s two biggest economies while turning around one minute later to play spoiler in Brussels. Unfortunately, no number of EU-Mercosur agreements and trips to Uruguay will obviate the need for such compromises, and a profession of helplessness sounds less like a statement of fact than an abdication of leadership. After opposing EU tariffs on Chinese electric vehicles last year for fear of retaliation against German firms, Berlin recently threw its weight behind EU subsidies for electric vehicle production—a logical next step after imposing those dreaded tariffs. It’s better to compromise than to be dragged to the table.
It is time to tackle the home front at home. Running across the Atlantic to register national talking points and make a mark on European policy by invoking US support is an outdated tactic that ultimately just confuses Americans and incentivizes the Trump-style divide-and-conquer method that European policymakers profess to dislike. Run to Brussels instead. The first signs from the new European Commission are positive for expanding defense expenditure, promoting technological innovation, slashing red tape, and integrating capital markets. And each of these are a door-opener for foreign capital.
A Stronger Europe and a Changing America
If Donald Trump’s re-election signals one thing, it is that the economic policy landscape is shifting rapidly. This will change the calculus for Europe in surprising ways. Americans often lament European rulemaking, most frequently in the data regulation space where Brussels has targeted US technology giants for anti-competitive behavior, or by asserting that the General Data Protection Regulation (GDPR) can kill a start-up before it starts. Yet, the weather looks a little tempestuous in America these days, as watchdogs pursue landmark antitrust cases against domestic players with surprising bipartisan support.
Other standard-bearers of discontent in the transatlantic marketplace, such as norms and standards for medical equipment, subsidization rows between airlines, and even certain aspects of agricultural policy show initial signs of temperance as Chinese competition becomes more acute and constituencies shift unpredictably within an inchoate Republican Party base (the designated US Secretary of Labor, Lori Chavez-DeRemer, is a unionist!) as well as Democratic soul-searching after the defeat of Kamala Harris.
It is also no secret that US firms like the European single market and prefer a streamlined set of rules to follow. Interconnected webs of fine print in Europe (take permitting, for example) are just as hard for Americans to crack as the patchwork of US financial markets regulation and trade control laws are for Europeans. US (and of course other foreign) players cannot scale up their production or investment portfolios without progress on the EU’s capital markets union. American investment in Europe will also scratch away at trade surpluses that irk a subset of US economic players, including the incoming president. There are opportunities to create a positive reinforcement across the Atlantic, even amid a downward tariff spiral that many are predicting.
Major European reforms that will boost competitiveness and security within the bloc will buffet countries from the inevitable accusations and intentional taunting in capitalized letters that are familiar from the first Trump administration. But global trade is starting to look a little like the six-sided chess game in Syria that my Turkish counterpart struggled to manage back in 2015. Even the most headstrong in Washington know that America cannot go it alone. As Germany heads toward elections, it needs to take out the map, throw its weight behind its friendly neighbors, and approach Washington from a position of strength.
Julia Friedlander is chief executive officer of Atlantik-Brücke.
