• Faced with an aggressive new Trump administration, Europeans must understand the assets they can use as deterrents
• Across trade, technology, infrastructure, finance and people-to-people relations, the EU and its European partners hold “cards” they can play
• Policymakers should assess the relative merits of doing so, and the costs to Europe that this would entail
• The EU should create an economic deterrence infrastructure and strengthen its existing anti-coercion instrument

At the card table

“The European Union”, posted Donald Trump on his Truth Social account on March 13th, is “one of the most hostile and abusive taxing and tariffing authorities in the world”. For good measure, the US president added that the EU “was formed for the sole purpose of taking advantage of the United States”. The broadside was just the latest reminder that his administration’s trade wars against Canada, China and Mexico are heading Europe’s way, too. Already its 25% levy on steel and aluminium imports has hit the EU. At the time of writing, there appears to be a significant chance of Trump going far beyond these with sweeping multi-sectoral tariffs.

This is part of a wider story. The second Trump administration has challenged Europe’s territorial sovereignty (by threatening to annex Greenland), its digital model (by attacking its technology regulations), and its traditional political party systems (by courting radical European political forces). The president’s approach to America’s supposed allies on the continent evokes less a sober “strategic rebalancing” than the Ming dynasty’s tributary system, with European leaders expected to kowtow to the emperor in Washington. Trump also appears inclined to pressure Ukraine and its European backers into a peace deal favourable to Russia, and to withdraw significant parts of America’s security commitments on the continent.

The president has implicitly revealed why he thinks he can push Europe around like this. In a comment during his hectoring encounter with Volodymyr Zelensky in the White House on February 28th, Trump told his Ukrainian counterpart: “You don’t have the cards.” Cards are Trump’s euphemism for power and leverage. And to the extent that the American president is capable of threatening Europe across a series of fronts, this is a function of the cards he holds and his willingness to play them aggressively. In other words: Trump seeks to exploit Europe’s economic, technological, political and security vulnerabilities for coercive ends.

Europeans need to learn quickly how to play cards. They must assess the hand they have—Europe’s own sources of leverage over Trump and Trump’s America—and how to strengthen that hand. They must develop a clear and realistic plan of what they want to achieve in the transatlantic game of poker that is likely only just beginning. Where do they want to remain aligned with the US? Where do they want to rebalance the relationship? And where do they want to break from America? Then, Europeans will need to play their hand cannily in pursuit of those ends.

The first step in this process is to review that European hand of cards, what it would mean to play them and how Europeans should proceed with such decision making. Providing that review is the purpose of this policy brief.

Why deterrence matters

First, however, it is worth asking whether Europeans really should threaten to retaliate, and then do so if Trump follows through on his many threats.

After all, Canada and Mexico have deployed significant deterrents, alongside concessions and incentives, but nonetheless now face significant new tariff barriers. Trump evidently sees those not just as a form of leverage but as ends in themselves; a means of bringing manufacturing back to the US and a way to finance tax cuts. So seeking to raise their cost to an administration that sees the EU as an ideological foe may be a futile exercise. Europeans might wonder whether it is not better to let the costs of US tariffs rebound onto American businesses and households, and wait for Trump to reap a domestic backlash.

The EU and its European partners should indeed seek negotiated outcomes and hope that markets will eventually constrain the president. But neither of these considerations overrides the reality that Trump most fundamentally cares about cards—or in other words, power. So any European response will need to be rooted primarily in power rather than economics, rules or US domestic politics.

To use an analogy, nuclear weapons are bad for everyone. But if Vladimir Putin threatens to use them against Europe, that does not mean that Europe should simply pledge not to use such weapons in the hope that the Kremlin will recognise the lose-lose logic. Credible deterrence is needed. The same is true of Trump’s threats today.

Can Europe put up such deterrence? The US president does not appear to believe so. Asked at a press briefing what would happen if Europeans retaliated against US tariffs, Trump retorted: “They can’t. They can try. But they can’t. […] We are the pot of gold. We’re the one that everybody wants. […] We just go cold turkey; we don’t buy anymore. And if that happens, we win.” In other words: the US has “escalation dominance” over Europe; holding a superior position across a range of fronts—from military and diplomatic to economic and technological—that could make European retaliation a losing bet.

But the reality is more complex. If the essence of nuclear deterrence is mutual assured destruction (MAD), Europe needs to demonstrate another kind of MAD: mutual asymmetric dependency. Significant aspects of America’s prosperity and geopolitical power have for years and sometimes decades benefited from good relations with Europe. And Europeans command certain of these chokepoints. In other words: they do hold cards.

Indeed, they have played them before. In 2018, when the first Trump administration threatened tariffs on European cars, Jean-Claude Juncker as European Commission president travelled to Washington with a basket of threats and offers, successfully deterring the US president from escalating the dispute. To be sure, Trump is markedly more aggressive and unchecked in his second administration, so what worked seven years ago would likely be inadequate this time. But the EU too has evolved over the intervening years and developed a harder geoeconomic edge and new deterrent tools. For example, its Anti-Coercion Instrument (ACI, sometimes dubbed the “bazooka”) entered into force in December 2023 and provides the union with a structure for calibrating collective responses, such as counter-tariffs, to detrimental third-country policies.

It is a reminder that Europeans have cards, can continue to improve their hand and must now think hard about how to play them.

Assessing Europe’s hand

The following tables set out Europe’s options. They are split into five categories of measures: tariff and trade; services, intellectual property (IP) and digital; critical technology and infrastructure; financial; and people-to-people. Inevitably, there is some overlap between the categories. Equally inevitably, the tools in question are a dense thicket of acronyms; a brief, clarifying guide to which precedes each options table. The tables themselves indicate the rationale for using each measure, the actions and tools involved in doing so, and the prospective cost to Europeans on a scale of 1 to 10 (where 10 is the greatest risk of self-damage). That final point deserves particular reflection. None of the options listed involve no risk at all to European interests; but the degree of risk they present—and where in the EU they would fall heaviest—varies significantly.

Some further caveats are in order. Firstly, the damage scores are merely indicative, and the question of the potential harm done by each of these measures warrants further research. Secondly, this brief exclusively maps Europe’s technological and economic deterrence options. It does not cover “cards” linked to non-commercial aspects of transatlantic defence and security cooperation, like US military access to European territory, air space and waters, or Europe-US intelligence sharing. Thirdly, this brief does not recommend any options above others. Which cards to play will depend on the actions of the US administration, as well as wider European considerations about how to combine and phase responses, how to blend deterrence with concessions and incentives to compromise, and how to manage and mitigate the costs to European interests.

Europe’s cards

Tariff and trade measures

Other than the ACI, the most obvious trade and tariffs tool is the Enforcement Regulation, which enables the commission to impose countermeasures in the absence of a functioning World Trade Organisation (WTO) dispute settlement system. But the EU can also weaponise its agricultural and environmental standards to discriminate against American products; for example through its Farm to Fork Strategy (acts and regulations advancing food sustainability), its Emissions Trading Scheme (EU ETS), its Registration, Evaluation, Authorisation and Restriction of Chemicals regulation (REACH) and its Ecodesign for Sustainable Product Regulation (ESPR, which limits market access to non-European competitors failing to meet sustainability criteria).

Services, intellectual property and digital measures

Two new digital acts enable the EU to clamp down on American software and online platforms: the Digital Services Act (DSA) regulates online marketplaces, social networks and content-sharing platforms, while the Digital Markets Act (DMA) ensures that large digital “gatekeepers” respect the single market. The commission has significant tools to fine and otherwise sanction firms for non compliance with either. But further levers also apply in this area: the EU’s General Data Protection Regulation (GDPR) imposes stringent protection and privacy rules on data processing and transfers, and the Network and Information Security Directive (NIS2) is a unified legal framework upholding cybersecurity in 18 critical sectors across the EU. National authorities enforce these, with the EU playing a cross-border coordination role. Meanwhile Vertical Block Exemption Regulation (VBER) provides exemptions from the EU’s competition laws. Financial regulations too can weigh down US services firms. The Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) can convey and withhold passport-like rights for companies offering financial services and trading platforms in the European Economic Area. And the commission determines whether the financial regulatory or supervisory regime of a non-EU country is equivalent to the corresponding EU framework.

Critical technology and infrastructure measures

Alongside some of the levers already discussed (like the ACI and NIS2), the EU can use various foreign-policy, defence and energy regulation tools to restrict American access to its critical infrastructure. The Permanent Structured Cooperation (PESCO) framework for joint military capability-building projects, the European Defence Fund (EDF) coordinating defence research and interoperability, and now the new ReArm Europe financing initiative can curb European procurement from US firms. Other tools enable Europeans to discriminate against those firms on strategic grounds: Article 346 of the Treaty on the Functioning of the European Union (TFEU) exempts military procurement from some single-market rules, the European Union Agency for Cybersecurity’s (ENISA) certification process provides common cyber standards, the EU Dual-Use Regulation restricts sensitive technology exports, and its Foreign Direct Investment (FDI) Regulation allows for the screening of inbound investments. But other “civilian” mechanisms also apply in this area. The International Procurement Instrument (IPI) enables the commission to impose tit-for-tat market restrictions on firms from countries that restrict their European counterparts, and the recently implemented Foreign Subsidies Regulation (FSR) enables Europeans to target companies in receipt of foreign subsidies. The EU can likewise use its Methane Regulation (monitoring and reducing methane emissions) and the Carbon Border Adjustment Mechanism (CBAM, the carbon tariff on imports to the EU coming into full force in 2026) to tighten the screws on US firms. Where critical technology is concerned, the EU’s AI Act (the world’s first) and its Horizon Europe and Digital Europe research programmes can be turned against US technology giants.

Financial measures

The EU and its member states have various means of loosening their financial relationships with the US. Measures to reduce US debt holdings and dollar-denominated trade could harness the Capital Requirements Directive/Regulation (CRD/CRR) and Solvency II regulations, whose prudential standards encompass banking licences and risk weightings, and the European Central Bank’s (ECB) currency swap lines, which can incentivise euro-denominated transactions and collateral holdings to weaken the dollar. Financial market protections like the Anti-Money- Laundering (AML) directives targeting hot money and the Markets in Crypto-Assets Regulation (MiCA) governing cryptocurrencies can take aim at the (often Trump-friendly) US crypto scene.

People-to-people measures

In this area, too, the ACI can be useful. So too can the EU sanctions tool enshrined in its Common Foreign and Security Policy.

How to build Europe’s economic deterrence regime

While it is beyond the remit of this policy brief to specify which cards the EU should prepare to play, it does propose that the union create a proper framework for deliberating on and reaching those decisions. Despite the advances of recent years—including the adoption of the ACI, the FDI regulation and the FSR—EU institutions and member-state capitals still treat economic deterrence as a narrow, defensive matter of risk mitigation. Faced with an antagonistic US administration as well as other adversaries like Russia and China, it must now build more pro-active and politically coordinated structures for action.

1. Publish an economic power doctrine

The EU, led by the commission and major member states, must define a fully-fledged economic power doctrine that articulates how, why and for what purpose Europe will use economic power in the age of cards. The doctrine must make explicit that checking coercive threats, preparing a war-ready economy, building and maintaining positions of asymmetric leverage, and cutting technological and industrial dependencies are vital European security interests. It should assert the case for Europeans to pool and deploy economic power in pursuit of these interests, even if this means challenging international trade rules. Europe’s core interests are to promote economic growth and protect its citizens—not to uphold international trade rules per se. These ends have long overlapped, but the Trumpian revolution, China’s unrelating mercantilism, and Russia’s destructive ambitions have already decoupled significant parts of the global economy from such strictures. Europeans can only restore international rules and institutions from a position of power.

2. Appoint an economic deterrence tsar

Europe’s negotiations with great powers like the US or China cannot be fragmented. Inspired by Michel Barnier’s centralised mandate to lead the Brexit talks with the British government on behalf of the EU, the union must appoint an economic deterrence tsar reporting directly to the European Commission president and not bound by organisational silos.

This tsar should wield a broad, cross-sectoral mandate encompassing trade, finance, digital, and regulatory domains. They should have clear authority to coordinate rapid responses spanning those domains, and to implement a credible, unified communication strategy both within the EU and externally. In close coordination with an EU Economic Security Network (EU ESN) as proposed by ECFR’s Agathe Demarais and Abraham Newmann of Georgetown University, the economic deterrence tsar should be tasked with developing a unified map of Europe’s dependencies and leverage points across different policy domains. This knowledge is currently scattered across the commission and across member states.

3. Establish an economic deterrence steering group

Recognising that not all member states may fully embrace this agenda, those who do should form a “coalition of the willing” by establishing an economic deterrence steering group. The group would propose strategic directions for the deterrence tsar and ensure prompt, coordinated action across the bloc. This group could include heads of government from leading EU economic and technological powers (France, Germany, Italy, the Netherlands, Poland, Spain and Sweden) along with the presidents of the commission and the council. Trusted non-EU allies—especially the United Kingdom—should be integrated in an associate capacity, formalised perhaps through the planned EU-UK security pact, to align on responses to coercion and other pressures. This model would mirror how France, Germany, Poland, and the UK have taken a central role in planning European security guarantees for Ukraine in recent weeks.

4. ACI 2.0

Europe’s most potent deterrence tool, the ACI, requires two qualified-majority votes and prolonged consultations. It would benefit from a fast-track mechanism that can be triggered by the deterrence tsar, enabling emergency responses within a defined timeframe (for example, a 72-hour decision window). Simultaneously, the EU should redefine “coercion” within the ACI to encompass a broader spectrum of threats; including digital sabotage, political destabilisation, cyber attacks on individual companies and assaults on democratic processes.

5. Shoring up the power base

The EU should establish an economic solidarity fund, financed by revenues from tariffs, digital fines, and other geoeconomic penalties, to compensate member states or sectors that are disproportionately affected by foreign aggression or EU retaliatory measures. In parallel, it should target support measures—such as grants and low-interest loans—to help strategic industries that are vulnerable to foreign weaponisation build alternative sourcing and secure supply chains, following the example of Japan. The European Investment Bank could finance these programmes, with specific funding calls for proposals for de-risking industries.

The long game

Preparing robust defences against US aggression could, counter-intuitively, stabilise the transatlantic bond in the long run. If Europe can credibly show that bullying tactics will backfire or amount to mere Pyrrhic victories, it could over time weaken those factions in Washington that back Trump’s combative and lose-lose use of America’s cards. It could even change some minds. By playing a united hand, Europeans can disprove Trump’s claim that Europe cannot match him in upping the ante. But that will mean building the infrastructure needed to join up the relevant assets and decisions. Whether it is a game of British bridge, Dutch toepen, French belote, German skat, Italian briscola, Latvian zole, Polish baska, or Spanish el mus, victory at the card table usually comes from combining mutually complementary cards at the right time. Ultimately, Europe’s strength in this new age depends on its ability to consolidate its economic cards into one formidable hand and play that hand smartly, transforming individual assets into a collective trump card against coercion.

To read the full Policy Brief as it appears on the European Council on Foreign Relations website, click here.

To read the full Policy Brief as a PDF, click here.

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On February 13^th, the Trump administration presented the Fair and Reciprocal Tariff Plan (FRTP), signalling that it is ready to end the global trading system as we know it. Financial markets greeted the proposal with a shrug, lost in the flurry of Trump’s executive orders. But in terms of consequences for the global economy, it is the most significant and devastating of Trump’s proposals.

What is being proposed?

Because of its name, many have interpreted the FRTP as a mirroring exercise in which the US would match its import tariffs with those faced by US exports in the partner country. The combination of countless products across a wide swathe of trade partners would lead to a huge number of different rates. In fact, such an exercise would be unworkable, as the US would have to manage over 2.6 million different tariff rates, depending on the product and the country. Even if the administrative complexity could be overcome, such a proposal would only raise tariff rates by a very modest amount. Trump’s plan would hit developing countries such as Vietnam and India hardest, since they tend to have higher tariffs. The consequences for Europe would be limited, as the average EU tariff rate on US imports is only half a per cent higher than US tariffs on EU imports. The EU could slightly lower its tariffs to iron out the wrinkle.

The problem is that Trump’s actual proposal is both simpler and more radical. According to White House officials, “the expected result is an individual additional tariff rate for each country or trading partner, rather than attempting to set corresponding tariff rates on every product.” Moreover, instead of just mirroring tariff rates, this overall additional tariff rate would be based on a combination of five factors:

1.      Tariffs levied on US imports;

2.      Taxes deemed unfair, extraterritorial or discriminatory, including value-added tax (VAT);

3.      Non-tariff barriers, harmful policies like subsidies and regulatory requirements that impose costs on US businesses operating  abroad;

4.      Exchange rate policies that interfere with market values; and

5.      Any other practice that interferes with market access or fair competition.

The potential scope of these measures is extraordinarily broad and represents a dramatic attempt to intervene in other countries’ internal regulation and taxation. It would de facto condition access to the US market on trading partners’ compliance with US preferences.

The US is now seeking to condition access to the US market on subordination to US preferences on regulation and taxation. The EU cannot accept this.

Value-added tax is used by 170 countries around the world to raise revenue for government services – but not in the US. VAT is trade neutral, as it applies equally to imported and domestic products. When goods cross the border, an adjustment is applied so that VAT is levied on imports while a rebate is given on VAT already paid for exported products: this ensures that VAT is only levied on domestic consumption. But in Trump’s view, VAT with its border adjustment amounts to a tariff. The idea that VAT should be treated as a tariff is without merit and economically illiterate; viewing VAT as a tariff would target Europe in particular as European countries have high VAT rates of around 19-21 per cent.

The EU is also particularly exposed to Trump’s threat of imposing tariffs in response to non-tariff barriers and regulatory requirements. The US has a long list of complaints about EU regulation, from long-standing issues like the EU’s sanitary and phytosanitary regulation and the General Data Protection Regulation (GDPR) to more recent regulations such as the AI Act, the Digital Markets Act, the Digital Services Act, the Corporate Sustainable Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). All of these can be said to impose costs on US business that trade with the EU – as can virtually any regulation that affects businesses in general.

Europe is less exposed to Trump’s threat to retaliate against ‘unfair’ exchange rates, which is more likely to target Asian countries, particularly China. The euro has a free-floating exchange rate, whereas Asian countries intervene more heavily to steer theirs. The last point of the Trump plan is perhaps the most dangerous: “any other practice that… interferes with market access or fair competition”. That is a catch-all that would give the US wide latitude to set tariffs based on its assessment of other countries’ economic policy. As with exchange rates, this likely targets Asian practices that lead to wage compression and more competitive exports. But the scope is broad enough for it to also target the EU.

What could this mean in practice?

The FRTP has not been finalised yet. The next steps are a series of reports due on April 1^st from the US Trade Representative, the Department of Commerce and other US agencies evaluating the impact of other countries’ trade practices. Next, these agencies will send the president joint policy recommendations, and the Office of Management and Budget will provide an evaluation by July. As there is no obvious way of translating the five factors mentioned in the Plan into a single additional tariff for each country, the actual tariff rate would in practice be at the complete discretion of the presidency. The timeline also means there is time for the EU to prepare and persuade Trump to change course.

If we are to take Trump seriously on VAT, he could impose tariffs of at least 20 per cent on the EU on that basis alone. A 20 per cent tariff would lead to an estimated fall in EU goods exports to the US of some $200 billion per year. This represents a full third of the EU’s current goods exports to the US, worth about 1 per cent of the EU’s GDP. As the dollar would strengthen and EU services are not affected by tariffs, the fall in goods exports would be somewhat compensated by increased services exports, bringing the net loss down to $166 billion. If regulatory barriers are also penalised, both the tariff and the economic consequences would be greater still.

Given the weakness of the European economy, this would certainly cause a recession. If the US gives all its partners the same treatment, the global effect would potentially be worse than Trump’s campaign promises of a 20 per cent general tariff and a 60 per cent tariff on China. In effect, average US tariffs would surge to their highest levels since the Great Depression, stoking inflation while a surging dollar would also harm US exports.

The plan would end de facto US participation in the global trading rules under the WTO, where each country faces the same tariff rate under the so-called most-favoured nation rule, except for free trade agreements with reciprocal commitments. Traders and partner countries would no longer benefit from predictable trading conditions, as US tariffs could change at a moment’s notice.

Will the US go through with it?

The question is whether the Trump administration will go through with this plan. Trump has a history of bluffing and cutting deals, as he did with both China and the EU in his first term. However, the second Trump administration should be taken seriously and literally, both on foreign policy and economic policy. The fact that tariffs on Canada and Mexico were suspended for one month pending negotiations is cold comfort. Trump’s demands for those countries were related to border enforcement and easier to find compromise on – and the tariffs are still set to go into effect on March 4^th. Meanwhile, the 10 per cent tariff hike on China has already been implemented. Trump 2.0 is driving a harder line on trade than in his first term: both the global steel and aluminium tariffs and the tariffs on Canada, Mexico and China are more comprehensive now and do not entail any exemptions as in the past.

The US administration is now making demands that are both specific and unattainable. In 2023, VAT accounted for over 15 per cent of government revenue in the EU, and it is out of question for fiscally pressed European countries to make any concessions on it. Trump also complains about EU tech regulation hitting US big tech, but rolling it back would amount to letting the US dictate the boundaries of acceptable regulation in the EU. Neither practicality nor principle allows for surrender to US demands.

How should Europe respond?

For Europe, a diplomatic approach remains the best solution. The EU should signal its willingness to increase purchases of American natural gas and defence kit – which in any case will be necessary in the short run while Europe builds up its own defence industry. Showing openness to discuss how recent regulation is implemented could help to find a mutually beneficial compromise. The regulatory simplification effort underway in Brussels, affecting environmental and sustainability regulations like the CSRD and the CSDDD, could be packaged as a deal with the US to avoid a trade war and give Trump a ‘win’.

To avoid a trade war, the EU could point to simplifications of regulations that it’s already planning to undertake – this could give Trump a ‘win’ without substantial concessions.

The EU could also consider adjusting certain politically significant tariffs. Reducing EU import tariffs on cars from 10 per cent to the US level of 2.5 per cent has already been publicly discussed. While a political ‘win’ for Trump, this cut in car tariffs could undermine the EU’s recent tariffs on Chinese electric vehicles if the EU, in compliance with WTO rules, cuts tariffs for everyone. With the EU and the US now in talks over US steel and aluminium tariffs, the EU should ensure that these talks also cover reciprocal tariffs, so that the EU does not give up concessions for steel and aluminium, only to be forced back to the negotiation table over reciprocal tariffs for yet more concessions.

At the same time, the EU must be firm and cannot show weakness. That means that the EU needs credible retaliatory measures. The threat must be compelling and credible enough to force the US to the negotiating table to conclude a deal – and it should also help mobilise American companies against tariffs. The European Commission will focus its possible retaliation measures on politically sensitive industries in states that are vulnerable for Republicans – past examples include orange juice from Florida, jeans, and Harley-Davidson motorcycles.

In trade wars, the nation that is more reliant on exports has a disadvantage. Tariffs threaten trade in goods, in which the EU has a large and persistent surplus with the US, worth €158 billion in 2023. Given the breadth and magnitude of the tariffs proposed, it would both be economically destructive and mathematically nearly impossible for the EU to respond to US tariffs exclusively with tariffs of its own. With EU goods exports to the US so much higher than US exports to the EU, the EU simply has fewer targets – as long as its response is limited to goods.

The logical step for the EU would therefore be to activate the Anti-Coercion Instrument (ACI) that was passed in 2023, largely as a response to Chinese policies. The ACI is meant to counteract economic coercion from foreign states that seek to force the EU or member-states to change policy. Since the US is explicitly seeking to coerce the EU to change its VAT regimes and regulatory policies, activating the ACI would give the EU wide latitude to design countermeasures. Under the ACI, the EU can enact tariffs, but also outright restrictions on exports and imports, measures affecting trade in services, access to public procurement, foreign direct investment and intellectual property rights. These measures could be generally targeted against the US through the ACI’s Article 7, or targeted at specific persons or corporations close to the US government through Article 8. Activating the ACI would allow for more creative and targeted responses to Trump’s tariffs, as well as evening the playing field by targeting services where the US runs a trade surplus with the EU of more than €100 billion.

Extending threats beyond tariffs would reduce the EU’s tactical disadvantage – but it would also increase the stakes. Under the ACI, the EU could target US services, including financial services or the tech sector. Moreover, the EU could even nullify US intellectual property rights in Europe, for anything from patents to media rights. These are sectors that traditionally have not been touched by trade conflicts. Targeting them would be a significant, but potentially effective threat of escalation.

However, trade remains economically beneficial, and trade restrictions are acts of self-harm for Europe’s open economy. The EU will think carefully before taking measures which would also cause severe disruption for the European economy – many Europeans work for US software firms and banks, and many US tech companies deliver services that would be difficult to replace. Although the EU may threaten some general measures to achieve a proportional response to US tariffs, the EU should focus on surgical strikes on high-visibility targets that would be politically painful, but with limited economic cost to the EU.

The EU should focus any retaliation against the US on high-visibility, symbolic targets and avoid vital services that Europeans rely on.

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Before Trump’s first term of office, Obama had presided over the Libya war (including Benghazi), the Arab Spring (including the onset of Syria’s civil war), Putin’s Crimea grab, the rise of ISIS, the rise of China, and the catastrophic Iran Deal (i.e. the JCPOA). 

Then Trump defeated ISIS, strengthened NATO, started to arm Ukraine, turned the screws back on Iran, put Israel and the Arabs on track to peace (the Abraham Accords), and reoriented US power – as well as allies – towards confronting China seriously, for the first time. 

After that, on Biden’s watch, things went badly wrong again. America got humiliated in Afghanistan, Ukraine was invaded by Russia, Israel was attacked by Hamas and Iran, the Houthi rebels brazenly blocked most shipping in the Red Sea, Sub-Saharan Africa was lost to the Russians and the Chinese, an Al-Qaeda graduate warlord took over Syria with Turkish help, and China grew stronger and more aggressive around Taiwan and beyond. 

Now, a second time, Trump must come in and clean up a failed Democratic president’s mess. The problem-set is clear enough, from the specific and immediate security challenges in Europe, Middle East and the Western Pacific, to the broader geo-economic and geo-political trends pressing on the creaking old world order. But what are Trump’s options and what might be his grand strategy agenda over the next four years? With everyone’s attention riveted on the ongoing crises in different areas of the globe, the truly big picture often slips from view.

In short, America’s new imperator has four types of choices in foreign affairs: détente, rollback, restraint, or dominion. The first two broadly correspond to the paths pursued by Nixon and Reagan; the third would conform to the “multipolarist” vision of so-called post-liberal “realists”; and the fourth would be a new departure. As always, none of these options are clear-cut, and in practice things always mix and cross over category definitions. But any effective policy must have a distinct and deliberate underlying strategic intent.

The context

The global strategic conditions of today are very different from those at the start of Trump’s first term. His 2017 National Security Strategy, expertly led by Nadia Schadlow, was a landmark document in that it recognised the return of great power competition in world affairs and the definitive end of the Fukuyama paradigm and America’s unipolar moment. 

The task for the 45th president’s national security team, from 2017 onwards, was to dust off the hard power playbook from the Cold War era and gear America up for long-term competition, particularly against China. This was largely achieved, but the environment was more permissive in 2017-2020, the threat less acute. 

Now, Trump 47 finds Russia transformed into an armed camp, with a much bigger and by now extremely experienced military machine; a China whose navy has since surpassed America’s in size, and which has made vast progress in military technology; an Iran even closer to nuclear break-out; and, beyond all this, a BRICS bloc that has grown from the original five members in January 2021, to ten at present – with Saudi Arabia also looking to join. Meanwhile, the Europeans have used the past four years to further de-industrialise their economies, stifle innovation, weaken their defences through transfers to Ukraine, and accelerate their socio-political disintegration through “progressive” policies like immigration and anti-free speech regulation.

The détente option

In these conditions, Donald Trump’s first grand-strategic option, as he resumes his duties as Commander in Chief, could be to reach for a détente process. As explained previously in these pages, the real purpose of détente – rather than the “appeasement” caricature drawn up by its critics, even back to Kissinger’s days – is “managed peaceful coexistence, not friendship”. The idea is to negotiate a reduction in tensions, from a position of strength, with a view to stabilising relations with adversaries and reducing the risk of war. 

Nixon and Kissinger engaged in détente with the Soviets upon taking office, at a time when America was in a very difficult situation: pressed between the cultural and political domestic upheaval driven by the “1968 Generation”, an unpopular and failing war in Vietnam, and a difficult economic position – all while the USSR was riding high economically and geopolitically. Détente offered the US a respite and, in the longer run, allowed it to regain momentum against the Soviets during Reagan’s time.

The specific issues at play today, and the nature of some of the challenges, may be different than in the 1970s, but the general picture is rather similar: the United States and its alliance system is under heavy military-economic pressure from its adversaries led by China, while the risk of catastrophic great power war – especially over Ukraine, but over Taiwan as well – is already at critical or near-critical levels. A strategy of reducing tensions (literally, détente) could be seen to fit the present situation, particularly in view of the need to bring the Ukraine war to an end.

Rollback

Instead of détente, many in Trump’s team – especially his more “traditional” picks for key foreign policy and national security roles – would likely be inclined to advise the opposite course of action: an uncompromising, Reagan-style strategy of aggressively confronting and rolling back Russian and Chinese power from all key regions where they’ve been making inroads. 

One inspiration could be Reagan’s 1983 National Security Decision Directive 75 which unambiguously tasked the US Government “to contain and over time reverse Soviet expansionism by competing effectively on a sustained basis with the Soviet Union in all international arenas—particularly in the overall military balance and in geographical regions of priority concern to the United States.” 

This was one of the most successful applications of strategy in history – from the formulation of the strategic concept to its complex implementation, including politically – as it did effectively lead to the collapse of the Soviet Union. 

The most obvious practical problem with attempting to replicate this approach today, however, is the sheer cost differential: the relative military-economic advantage the US holds over China today (leaving aside the problems of Russia and Iran, and other aspects related to the global balance) is significantly less than it was the case with respect to the USSR in the 1980s. Reagan’s strategy was based on a major military build-up – including the space-based Strategic Defence Initiative for missile defence – combined with much better technology, which the Soviets could not match.

An arms race on this scale is not feasible today – or not in the next few years at any rate – both for economic reasons but also for technological and political reasons. A military buildup under Trump is certainly to be expected, and the well-performing US economy will likely afford it. But the scale required for this to parallel what Reagan achieved, and the political difficulties of switching to aggressive deployments – and navigating the crises that would certainly ensue as adversaries react – might put all this out of reach. The ideological element of Reagan’s struggle against the “evil communist empire”, which was central to his strategy, is likewise largely missing from the current environment which more likely resembles the world of 19th century balance of power politics.

Restraint

A grand strategy of restraint would be Trump’s third option at this point. The term is somewhat imprecise and it can be encountered under different meanings in defence and foreign policy debates. Here, it is used to capture what in recent years has been variously been described as the “isolationist” or Mearsheimer-style “realist” tendency on some of the new Right in US politics, and of many others elsewhere (including figures in allied countries) who embrace the “post-liberal” critique of the “American hegemony” in international affairs and its supposed ills. 

These are often enthusiasts for a “multipolar” world order, who essentially believe that US power has been misused – certainly in practice, but also from a moral standpoint – and who would therefore welcome the end of American primacy, partly as a way to save the US from the costly mistakes of its own actions and interventions abroad. 

Opinion among “restrainers” sits on a spectrum. Some prescribe a rather radical form of isolationism, complete with a withdrawal from alliances, or at least “mothballing” them – for example, the idea of a “dormant NATO”. Others accept the need for the US to be able to intervene militarily when its vital interests demand it, but reject the notion of any ideological or moral interference in such decisions. Their prescriptions centre on reducing America’s global military deployments and shifting a large part of the global security burden on to allies.

Implicit in almost all variations of the restraint argument is a readiness to accept the end of US primacy and the relative decline of US power – and thus a multipolar world – as a foregone conclusion. On this basis alone we may safely expect this view to have little traction with Trump, who has a strong, instinctive belief in America’s potential and indeed destiny. 

The problem of the restrainers, multipolarists and of all those who think that American primacy is over and that China – or a China-led system – is the future, is their short-term perspective. The fact is that the power of great nations experiences fluctuations over time. China’s “rise” is a phenomenon less than two decades old, in its more substantial form – and the coming years and decades will bring plenty of opportunities for it to go by the way of the Soviet Union. Not more than 15 years ago the EU and the US economies were roughly equal in size, and one could have foretold – many did – a great future for the European bloc. Today, America’s GDP is now around 50% higher than Europe’s, and the EU is in the process of disappearing in the rearview mirror of history. 

The fundamentals of the United States – economically, technologically, militarily and even demographically – are much stronger than those of any other major country. Trump knows this too, which is why his actual foreign policy vision is far removed from the “restraint” fallacy. If anything, the best bet is that, from a historical standpoint, the age of American power has barely begun.

Dominion

The path that Donald Trump is most likely to pursue in US grand strategy – perhaps in conjunction with elements of détente – can be provisionally called dominion. He is returning to the White House not only backed by strong political power and legitimacy – confirmed at the ballot box, by his landslide win – and with a fully-prepared large-scale governing team ready to take full control of the American state after 20 January, but also benefiting from significant geopolitical advantages, over both allies and foes. 

Despite its defiant tone and recalcitrant attitude, Europe is completely exposed and prostrate before American power. Under the Democrats, this mattered little because Biden, as a Trans-Atlanticist of the classic sort, held to the old post-WWII “allied spirit” that – despite the occasional rows – has guided America’s relationship with Europe for 80 years. But, technically, it doesn’t have to be like this, certainly not when European power has completely collapsed. A more irreverent and purely transactional president – say, one like Trump – will now be in a position to exact a heavy price for continued cooperation with Europe, and to push the “Old Lady” to the limit. Considering the insults he has had to endure from the across the “cradle of Western civilisation”, who can blame him.

Other allies are equally on or almost on their knees, and in the position of supplicants for US protection and help – including over economics and trade. These range from Canada; to the UK, with its economy now ruined by a combination of atrocious Tory and Labour policies; to Israel, which, its superb military accomplishments and bravery aside, depends heavily on US support and aid; and on to places like Australia, for whom AUKUS is now essential but, again, depends on US policy especially on tech cooperation and submarine deliveries; and, of course, the greatest dependent on US help – Ukraine. 

Foes, too, now hang on what Trump might do next. Russia, economically vulnerable after three years of full-scale war, needs Trump’s cooperation to get some kind of deal done over Ukraine, and likely fears American economic pressure especially on the oil front. Certainly, Moscow is ready for the worst case scenario as well, and is likely able to push on with the war even under the harshest conditions, but that would carry much higher costs and would change the nature of the conflict. 

In its turn, Iran, reeling from its multi-level defeats at Israel’s hands, must now be truly concerned about the real possibility of a US-Israeli strike on its nuclear programme. This would have been out of the question under the pro-Iran Democrats; but Trump’s arrival spells potential disaster for the ayatollahs. 

As Trump takes office, then, it is only China that stands as an implacable and difficult strategic adversary. But even China is experiencing economic difficulties, and its interest, in the short term at least, is to avoid a mutually-destructive trade war.

In this context, Trump is now in an unparalleled position of strength towards allies, which would allow him to dictate new terms of business – but also towards opponents, which likewise present him with opportunities for advancing his America First foreign policy chiefly through diplomacy and trade. 

Such a confluence of factors – leverage abroad, strength at home, despite all the domestic challenges and troubles – does not happen often, and certainly not in conjunction with a pattern- (and rule-)breaking character like Trump, and with a moment of such flux in international relations. 

The net result of all this is a great opportunity for Trump to assert his will – backed by the full power of the United States – in the world, and to start to imagine, and indeed to try, completely new possibilities in world affairs. We have already had a preview of this recently in his extraordinary proposals for Canada and Greenland to join the US. These are not just more “evidence” of Trump’s “crazy” mindset, as has been widely commented in the media. 

What these Trump suggestions really indicate is an instinctive sense of geopolitical opportunity on a grand scale, linked to the ongoing collapse in the global system of norms that has shaped world order as we’ve known it. From his vantage point as the planet’s most powerful man, Trump may well question exactly why should his and America’s options be limited by “international rules”. 

Who says that the current configuration of the USA is immutable? And if it is not, then how can it be amended? Might America even evolve beyond its republican form? After all, empire has provided history’s most enduring framework for organising human societies on a large scale; modern “liberal democracies” or even older republics, kingdoms and other forms of government are often mere blips on the timeline, by comparison. If anyone is willing and also able to break with the current order and open new paths in foreign policy behaviour – ignoring any and all gasps of shock from the “elite opinion” – it is Trump. Indeed, he has already done so with Greenland.

The notion that borders are now again open to revision (including by force), that countries may disappear and new ones arise, or indeed that countries could come together into new (or restored) “unions”, is entering the mainstream of contemporary political thinking. Just in recent decades we have seen the creation of South Sudan and Kosovo, not to mention the plethora of unrecognised post-conflict states ranging from Transnistria to Somaliland. Even the UK government is negotiating the surrender of its sovereignty over the Chagos Islands to Mauritius.

Trump’s America may not be about to embark on a spree of imperial conquest, but the serious point here is that we have arrived at a juncture in world history when profound changes are becoming possible. We are used to debates about how to reform “world order”, what tweaks should be applied to “global governance”, and how alliance systems might evolve. 

But perhaps we are not thinking big enough. Perhaps the world is reverting to older patterns of statecraft where expansion is once again becoming a legitimate objective of state action – in the classic sense of direct territorial acquisition, or in the form of protectorates and other kinds of dependencies, or indeed, most certainly, in the form of classic spheres of interests. 

As regions continue to convulse under the geopolitical pressures and political associations like the EU head towards fragmentation, the great imperial-like powers like the US may well be in a position to offer hard-pressed polities a suzerainty deal they could not refuse. Rather than “great power competition”, a more appropriate framework for long-term US grand strategy, then, should be dominion. After all, the end of the Republic was only the beginning of half a millennium of imperial rule at Rome.

To read the full comment as posted on the Brussels Signal, click here.

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