What are Europe’s biggest weak spots for a Trump presidency?

Good morning from Budapest, where European leaders gather today to work out how they are going to navigate a second Donald Trump presidency.

German Chancellor Olaf Scholz yesterday sacked his finance minister Christian Lindner and announced a no-confidence vote for January, heralding an early end to his unloved governing coalition, and leaving a void at the heart of Europe at this crucial time.

We lay out the biggest challenges the EU will face under Trump here.

Climate policy

It’s “virtually certain” that this year will be the warmest ever on record, scientists say. But Trump’s victory may well leave the EU as the last man standing for climate action

Trump has said he will again pull the US out of the Paris climate agreement to limit global warming to 1.5C. He is also keen to exploit fossil fuels: his campaign slogan was “drill, baby, drill”.

The EU, by contrast, has among the world’s most ambitious climate goals and is the biggest climate finance donor. But its economy is also suffering from complex bureaucracy and high energy prices.

EU officials yesterday put on a brave face. Climate action should still be seen as “a matter of both security and of opportunity for both Europe and the United States”, said one.

But many worry that far-right governments in the EU may be emboldened by a Trump presidency to fight harder against the bloc’s climate goals, especially if US businesses aren’t hampered by equivalent restrictions.

Former European environment commissioner Janez Potočnik said it was a “different context” to Trump’s election in 2016 — in the wake of extreme weather events in the EU and US this year. “Let’s hope that this will be seen and recognised.”

Trade

Europe is acutely vulnerable to Trump’s economic policy plans, as the US accounted for a fifth of the bloc’s total exports last year, according to Eurostat.

Trump wants to close the €158bn trade deficit the US has with the EU, and has talked of a blanket 20 per cent tariffs on imports from the bloc. Germany, Italy and Ireland are the EU countries with the highest export level to the US, and would be most affected.

Frantic talks will soon begin between EU officials and Trump’s transition team about how tariffs can be avoided, with a likely mix of carrot and stick. Incoming EU trade commissioner Maroš Šefčovič said this week he would offer “co-operation” with the election winner, but “stand up for our interests”.

But despite the European Commission’s assurances that it is prepared, the ranks of senior officials dealing with the US have been thinned. Several officials in the trade and agriculture departments have retired and not been replaced over the past year. Key officials in the trade directorate dealing with the US and Latin America are in an acting capacity, covering two jobs.

War in Ukraine

Ukraine is likely to be Trump’s most prominent — and most rapid — geopolitical victim.

Trump has campaigned on a promise to end the war in Ukraine before his inauguration on January 20, even if that means forcing Kyiv to swallow terms — such as relinquishing of territory to Russia — that it has said it cannot accept.

As president, Trump holds much of Ukraine’s fate in his hands directly. Kyiv relies heavily on US military, financial and diplomatic support, much of which the White House can halt or throttle off. He can also use executive orders to lift sanctions on Russia, should he choose.

Some still hope that was just a campaign slogan to better bash the Joe Biden administration, but the signs suggest even Kyiv is leaning into the new reality: President Volodymyr Zelenskyy yesterday hailed Trump’s ability to bring “a just peace” to his country.

EU defence

Should Trump follow through on his threat to suspend aid to Ukraine, the burden would fall on Europe. While European officials admit that they simply can’t replace US military shipments due to America’s far larger stockpiles, finding more cash is possible, if politically challenging.

But Europe may have a far larger problem to deal with simultaneously: it’s own security and defence. Trump has threatened to let Russia do “whatever the hell they want” to European Nato allies who he thinks don’t pay enough for their own defence. That comes on top of his repeated musings about withdrawing US troops and weapons out of Europe.

The cost of mitigating that is astronomical. A pan-European air defence shield, for example, would cost €500bn, the EU’s incoming defence commissioner Andrius Kubilius said yesterday. That’s roughly 50 per cent more than EU countries collectively spend on defence each year, he added.

“We will need to take more and more responsibility on our shoulders. We need to spend more . . . because of Putin,” Kubilius said.

Chart du jour: Macro shock

What to watch today

1. European Political Community meeting in Budapest.

2. Italian President Sergio Mattarella visits his counterpart Xi Jinping in China.

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