Voting in the U.S. presidential election is over, and as of this writing, it is still unclear who will be the next leader of the free world. Governments around Europe, as well as policymakers in Brussels, are attentively waiting and holding back any comments. While the dust settles overseas, many ask themselves: What will the next four years bring for Europe?
APCO Survey: High interest among EU citizens in the U.S. elections
Interest in the U.S. election is at an all-time high in European countries. In APCO’s recent geopolitics poll, among 900 adults in six countries worldwide*, roughly two-thirds of German, 50% of British and even 72% of Italian respondents deemed the U.S. presidential election somewhat or even very important to them. This high interest in international politics is easily explained by the expected economic ramifications, not only in the United States but worldwide. When asked about which topic would be most impacted by the November 3rd results, the overwhelming majority of respondents in Germany, Italy, and Great Britain named business and trade between countries. In the second place, respondents in Italy and Great Britain named global stock markets, whereas Germans were more concerned about their country’s employment rates. These results point to a great awareness of the United States as a destination for German exports.
Paradigm shift in trade is unlikely
It is no secret that many in Brussels and across the continent would prefer a change in U.S. leadership in the hopes of reviving transatlantic relations, guiding the United States back into the World Health Organization, renewing their commitment to the Paris Agreement and breaking their blockage of the WTO. In addition, leaders in Europe, especially Germany, are eager to talk to the next U.S. administration about transatlantic trade. Although Jean-Claude Juncker managed to broker a truce in the trade war with President Trump in July 2018, the underlying conflict of the tariffs on cars and other products is still hanging over transatlantic relations. Businesses and political stakeholders alike are wondering whether or not a Biden administration would bring a paradigm shift in trade relations.
In the history of American politics, Republican presidents have been fonder of international free trade than their democratic counterparts. President Trump has broken with this tradition and is likely to continue his course if he wins reelection. Both Democrats and Republicans are, at this point, unified in their desire to make the United States more independent from imports and to attract more industry to the country. President Trump’s use of tariffs and other means to block foreign competition to U.S. companies resembles classic import-substitution policy. A Biden presidency would likely take a more dialogue-oriented and cooperation-based approach and focus more on businesses in the United States than trading partners abroad. His platform includes a stimulus program for domestically produced goods and services (“Buy American”) and a reform of public procurement and bidding. The result, however, will be the same for both candidates—a trade policy that, in the long run, leaves foreign companies no choice but to replace exports to the United States with production there. Businesses will, therefore, need to develop a better understanding of the political framework in their respective fields and carefully consider their investment decisions.
Impact on international relations
The four years of the Trump administration have certainly left their marks on transatlantic relations, which hit a low point in July 2018, when the president called the European Union one of the United States’ “biggest foes.” Along with lengthy and contentious discussions related to the U.S. trade deficit, President Trump was also very vocal in calling for European countries to contribute more to the NATO budget and take more responsibility for security policy. Yet, the cooling of the relationship with their most important ally led leaders in the European Union to reconsider their position in the world and urged the formation of a new-found self-confidence within the bloc, which culminated in the current discussions about “EU strategic autonomy.” Moreover, President Trump’s conservative aversion to international authorities and decision making has brought about a crisis of multilateralism and ever more louder calls for remedial action. Even Commission President von der Leyen attested that the global system suffered from “a creeping paralysis” and called for speedy reforms.
For the EU, a reform of the international system would be easier to accomplish with a Biden administration. His record as vice president and senator suggests a return to more traditional international diplomacy, thus opening opportunities for partial single or multiple issue-based deals with the EU, for instance on climate change or data protection. However, the demand for Europe to be more self-reliant in security policy is significantly older than four years, and even a Democratic president would exhibit a tough stance on China’s subsidy policy and market access for foreign companies — with its respective repercussions for European policy makers and businesses.
Instability nurtures doubt in democracy
As expected from the beginning, Election Day in the United States didn’t bring a clear decision and we now stand at the beginning of a prolonged struggle over the country’s highest office, with the incumbent president publicly contemplating challenging the results in court. German Defense Minister Annegret Kramp-Karrenbauer promptly warned of a “highly explosive situation” in the United States. The external impression of this domestic struggle cannot be underestimated: The EU is currently in a phase of negotiating their next Multiannual Financial Framework (MFF), with the most contentious issue being the rule of law mechanism. It will be a hard sell for Brussels to convince leaders in middle- and eastern-European countries of the validity of rule of law principles, when they are disregarded by the bloc’s biggest ally across the pond.
A “new normal” in EU-U.S. relations is taking shape, regardless of a second Trump term or a change in leadership. Businesses will need to navigate this imminent insecurity by being more proactive and positioning themselves more than ever in the political sphere.
*APCO Worldwide conducted a poll of n=900 adults with n=150 in each the United States, Great Britain, Germany, Italy, Singapore and India between October 6-7, 2020.