In February of last year, Donald Trump convened the first full cabinet meeting of his second term in the White House. He proudly announced his intention to impose sweeping tariffs on the US’s closest allies in Europe. When asked by a reporter whether Europe might retaliate, Trump sounded confident. “They can’t,” he said. Pressed to explain, he continued: “We are the pot of gold. We’re the one that everybody wants. And they can retaliate, but it cannot be a successful retaliation.” As Trump saw it, Europe was weak and feckless – a minnow compared with the American economic juggernaut. When confronted with a US president prepared to throw his country’s weight around, Europe would certainly cave.
In the year since, Trump has repeatedly wielded America’s economic might against Europe, from coercing the EU and the UK to swallow lopsided trade deals to pressuring Denmark to sell him Greenland. And time and again, his assessment of European countries – that they would scurry to him, hat in hand, eager to make a deal – has been vindicated.
To survive another three years of Trump, European leaders will need a different approach. Having spent years as a state department official designing and negotiating sanctions, I’ve seen how economic pressure works in practice – and how it can fail when the target is prepared to absorb pain and push back.
India, Brazil and China have faced similar Trumpian economic coercion and managed to survive while preserving their core interests. In the process, they demonstrated that they are serious geoeconomic players who can’t be bullied. Though their strategies differed, each combined three elements: resolve, resilience and retaliation. Europe will need all three to withstand Trump with its dignity intact.
The first step is to rally public support for defiance. While losing access to the US market is painful – after all, the US is the world’s biggest importer – for most countries, it’s survivable. India is a case in point. Last summer, piqued by the refusal of its prime minister, Narendra Modi, to nominate him for the Nobel peace prize, Trump slapped a 50% levy on India, making it among the most heavily tariffed countries in the world. Instead of hastily penning a Nobel nomination letter, Modi dug in his heels. “India will never compromise on the interests of its farmers, livestock rearers and fisherfolk,” he declared.
Modi’s resolve galvanised the Indian people. Lawmakers coordinated boycotts of American products, and businesses refused to cut prices to keep selling into the US market. Eventually, Trump grew frustrated and turned his attention elsewhere. By rejecting appeasement and standing ready to endure short-term pain, India survived Trump’s onslaught and gained grudging respect in the White House.
The second step is to redirect trade. Around the same time his relationship with Modi broke down, Trump picked a fight with Brazil’s president, Luiz Inácio Lula da Silva. Lula had committed the sin of allowing his government to prosecute his predecessor, the rightwing populist Jair Bolsonaro, for plotting a coup after his 2022 electoral defeat. To try to force Lula to drop the charges, Trump slapped steep tariffs on Brazilian goods and imposed sanctions on the supreme court judge who was overseeing Bolsonaro’s case.
Brazil’s response centred on adaptation. Instead of scrambling to regain access to the US, Lula’s government moved quickly to reorient to other markets. Shipments of beef and coffee that had been heading for America were rerouted to China, the Gulf and south-east Asia, aided by state-backed finance and quiet coordination with buyers. By the end of the year, Brazilian exports had hit a record high, while US consumers grumbled about rising prices for their morning coffee. Having failed to force Lula’s hand, Trump ultimately removed the tariffs and lifted sanctions on the Brazilian judge. By showing Brazil’s resilience to US pressure, Lula stripped Trump of his leverage.
The third and final step is retaliation. During Trump’s first term, the Chinese president, Xi Jinping, met a group of CEOs before the opening round of US tariffs took effect. “In the west, you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” Xi said. “In our culture, we punch back.”
At the time, Beijing was unprepared for an economic war. But it started meticulously mapping the choke points it could one day weaponise against the US. When Trump returned to the White House and swiftly unleashed a new wave of tariffs and tech restrictions on China, Beijing unveiled its plan: in addition to reciprocating Trump’s sky-high duties, it cut off America’s access to the rare-earth minerals it needs to build everything from automobiles to fighter jets. As China refines 90% of the global supply of these minerals, the impact was immediate, forcing companies such as Ford and Suzuki to close factories. The one-two punch of the tariffs and rare-earth restrictions erased trillions from the US stock market and raised fears of a recession. Trump hurriedly agreed to a truce, and within months he was allowing Chinese firms to buy powerful Nvidia AI chips and referring to the US and China as the “G2”.
The Greenland crisis was not the first time Trump has threatened economic war against Europe, and it won’t be the last. Europe needs a strategy.
Like Modi, European leaders must show resolve – rallying their publics to accept some economic pain in defence of their autonomy. A number of leaders have started moving in this direction, but the effort remains uneven, and Trump will read division as weakness. Like Lula, Europe will also need to improve economic resilience. This is where it has made the greatest progress, with the EU concluding new trade pacts with South American countries and India.
But any European strategy will fail unless it also learns from Xi. Retaliation makes many in Europe uncomfortable, and for good reason. Yet the transatlantic relationship is not one of one-way dependence; it is one of interdependence. Silicon Valley earns a large share of its profits in Europe. American ambitions to manufacture advanced semiconductors at home would crash without Dutch chipmaking equipment. European investors own $8tn of US stocks and bonds.
Europe’s goal, of course, should not be to play all these cards. The result would be economic calamity for both sides. What Europe needs is something simpler and more credible: a plan to play some of them when the next crisis arrives.
Over the past year, Europe has learned that Trump’s economic threats won’t just go away on their own. They stop only when they become expensive.
• Edward Fishman is director of the Center for Geoeconomic Studies at the Council on Foreign Relations and the author of Chokepoints: How Economic Warfare Is Changing the World (published by Elliott & Thompson in the UK and Portfolio in the US).
Further reading
The Economic Consequences of Mr Trump: What the Trade War Means for the World by Philip Coggan (Profile, £7.99)
The Fractured Age: How the Return of Geopolitics Will Splinter the Global Economy by Neil Shearing (John Murray, £25)
The Rise and Fall of the Great Powers: Five Hundred Years of History of Fluctuating Economic Muscle and Military Might by Paul Kennedy (William Collins, £16.99)
