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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Europeans are rightly worried about the possibility of a second Donald Trump presidency. This is a man who has said Russians should do “whatever the hell they want” on the continent, threatened a 10 per cent tax on all imported goods (not just those from China), and offended any number of cultural sensibilities. But while it’s smart to prepare for the possibility of another Trump administration, Europeans should also have a plan for what to do if the Democrats win in the elections this year.
I say Democrats because president Joe Biden could yet step aside as their candidate due to concerns about his age. This has become a very live conversation among the party leadership following special counsel Robert Hur’s report that cleared Biden of any criminal wrongdoing in the investigation over classified documents, but portrayed him as an elderly man unable to remember key dates.
Yet even if that happens, he would probably be replaced by someone who would double down on the core policy ideas of his administration, including re-industrialisation, a new approach to global trade and a shift from trickle-down economics to a focus on curbing corporate power and profiteering. I’d put my bet on a Midwestern populist to replace Biden rather than a shiny Californian centrist.
This raises a key point. Many Europeans look at Biden’s surprising lack of popularity despite a stunning US economic recovery and assume that the policy message rather than the man is the problem. But they are wrong. Americans aren’t looking for incremental solutions. They just need better messaging of what a post-neoliberal world looks like in real life.
US voters may not know — or care — about the Washington consensus, economist Milton Friedman or legal scholar Robert Bork. But they know greed and concentration of power when they see them, or more particularly when they feel them, as they have over the past two years of inflation and exploding corporate profits and margins in many areas.
Democrats will double down on that felt experience in the 2024 campaign. In 2018, many Democratic midterm victors ran on the message that Trump’s corporate tax cuts were a giveaway to the rich. While the White House has been slow to recognise that fiscal interventions designed for the mid to longer term weren’t a balm for short-term price pressures, it’s also true that many voters hold corporations more responsible for the pressures than government.
One recent survey found a 15-point increase since January 2022 in those who say “corporations are being greedy”; 59 per cent of the public now think private sector profiteering is a major cause of inflation, matching those who say fiscal stimulus is.
I suspect this sentiment will continue to rise, and the Democrats will push the message of concentration of power and corporate profiteering to victory in November. I also think they’ll be helped by Trump’s own goals, like his Nato comments, which nudge moderate Republicans and patriotic independents towards any non-Trump candidate. If so, Europeans won’t have to worry about the US as a Nato partner, but they will have to come to grips with its move to a post-Bretton Woods worldview in other areas of policymaking.
So far, that shift hasn’t gone down easily. Consider, for example, the European furore over the idea that the “New Brandeis” school of competition policy — named for the Supreme Court justice who curbed monopoly power and exemplified by Federal Trade Commission chair Lina Khan — is more aggressive and on point for the current era than the technocratic EU approach.
Then there’s Europe’s lack of enthusiasm for the US approach to climate change (which involves industrial policy versus carbon pricing) or its befuddlement over US trade representative Katherine Tai’s challenges to the conventional approach in areas such as digital flows or environmental and labour standards.
Part of the discomfort is that these ideas are new, and still being fleshed out. But ask any Big Tech executive or multinational chief executive in private, and they’ll say that US policymakers pose a much bigger threat to concentrated power than Europeans do. Witness the recent Wall Street Journal editorial bashing both Khan and Tai. Few people in big business are wringing their hands about Brussels these days.
A Democratic president won’t be looking at 10 per cent tariffs, but they may very well pressure Europe to join new trade actions and alliances in areas such as transport and logistics, critical minerals or electric vehicles. I think we’d see more pressure on European leaders to join the US in a shared approach to Chinese mercantilism, including both capital controls and increased subsidies for re-industrialisation in strategic industries at home.
The EU is on the fence about all of this, understandably. It sits in between the US and China geographically, and wants to maintain that position economically and strategically as well. But I think that the political winds have begun to shift. German automakers or French luxury purveyors may hope to have it both ways, but European politicians, even in places such as Berlin, are beginning to realise that will be impossible.
Europe is thinking hard about Trump 2 and a post-Nato future. But it also needs a response to the possibility of Biden 2, and what comes after the Washington consensus.
