Trump’s Iowa victory shows Europe, and world in general, must prepare for more turmoil

The prospect of Donald Trump returning to power is just one source of uncertainty pushing Europe to plan for a tumultuous era to 2030 and beyond
The EU must also contend with an increasingly complex geopolitical environment and waning economic competitiveness

Andrew Hammond

Published: 7:30pm, 17 Jan 2024

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Recent global shocks, including the Covid-19 pandemic and the Russian invasion of Ukraine, have hit much of the world hard in the past few years, especially Europe. However, there could potentially be even bigger political and economic chaos on the horizon during the rest of the decade.

In Europe, this view was outlined on Tuesday by Belgian Prime Minister Alexander De Croo, whose country currently holds the European Union’s rotating presidency in the first half of this year. De Croo warned that former US president Donald Trump’s victory on Monday in the Iowa Republican caucus means that “if 2024 brings us ‘America first’ again, it is really more than ever ‘Europe on its own’.”

However, he went on to say that, “We should, as Europeans, not fear that prospect; we should embrace it,” adding that Europe must become “stronger, more sovereign, more self-reliant”. What De Croo highlights here is the need for the EU specifically, and possibly the world at large, to use 2024 to plan ahead for what could be another tumultuous period.

With specific regard to Trump, there are concerns in Europe that if he does win a second term as US president, he could withdraw from Nato, the transatlantic alliance which underpins European security. He could also end US support for Ukraine in the war against Russia, not to mention ratchet up US economic sanctions across the world and withdraw the United States from the Paris global climate change treaty for a second time.

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However, the range of economic and political issues of concern to the world goes well beyond Trump. In Europe, key decision-makers are looking ahead to the period up until 2030. This time frame covers not only the next term of the European Commission but also the next UK Parliament, the US presidency, the Russian presidential term and the current term of President Xi Jinping.

In thinking through these 2030 scenarios, the core uncertainties which may have the most impact in shaping Europe’s future at a crucial moment are at least twofold. A first key question is whether the geopolitical context will grow worse or better for Europe in that time. Following Russian President Vladimir Putin’s 2022 invasion of Ukraine, much depends here on the future foreign policy not just of Russia but also other nations, including the United States and China.

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A second question is whether the EU and Europe more broadly can boost economic competitiveness and close the growth gap with the US. In 2008 the EU’s economy was larger than that of the US, US$16.3 trillion versus US$14.8 trillion. By 2023, however, the US economy had grown to more than US$26 trillion whereas the EU and UK economies together had only reached about US$21 trillion.

According to Christian Ulbrich, the chief executive of global real estate services firm JLL, Europe’s “wealth is melting away at rapid speed” and there is a pressing need for key reforms.

Much uncertainty remains about the overall fortunes of the EU in the years ahead, and it is particularly hard to ascertain the future economic trajectory of the bloc. What is more certain, however, is that the geopolitical context outside Europe is unlikely to improve significantly from today and could still grow significantly worse. This is probable, regardless of whether Trump wins the 2024 US presidential election.

In today’s increasingly multipolar world order, the revisionist powers of Russia and China are flexing their muscles. This is a worry for many politicians. Just last month, German defence minister Boris Pistorius warned against the possibility of further Russian aggression in Europe by 2030, including the possibility of invasions of Georgia and/or Moldova.

It is not only security and defence officials who are making these arguments. Last month, International Monetary Fund deputy managing director Gita Gopinath warned that the world is heading towards a “new Cold War” with the economy fragmenting into two blocs between the West and a Russia and China grouping in the East. She said “geoeconomic fragmentation is increasingly a reality”.

Gita Gopinath, deputy managing director of the International Monetary Fund, speaks during a panel session on the opening day of the World Economic Forum in Davos, Switzerland, on January 16. Photo: Bloomberg

Much more uncertain, however, is whether Europe will be able to recover its economic competitive advantage vis-à-vis the US economy and other world powers in the next five years. This could be possible if the shocks of recent years are not repeated, but there is a significant chance that such a repeat will happen, especially in a more challenging geopolitical context.

The problem, as Francois Geerolf of the French Observatory of Economic Conditions asserts, is that, “With each crisis, the euro zone permanently loses a few points of growth to the United States.”

Taken together, the period until 2030 will be another highly uncertain time for Europe specifically and for the world at large. While policymakers can hope for the best, they urgently need to build resilience to prepare for the worst so they do not get caught off guard by the economic and political perils that might lie ahead.

Andrew Hammond is an associate at LSE IDEAS (the Centre for International Affairs, Diplomacy and Strategy) at the London School of Economics and Political Science. He was formerly a UK government special adviser at a time when Britain last held the presidency of the European Union