Hiding in plain sight
Since his inauguration as US President, Donald Trump has turned the world upside down, as he indeed promised on the campaign trail. Like many people, I have underestimated his determination to follow through on issues such as trade policy and the nature of his relationship with traditional allies, especially in Europe. Although Trump’s bark proved to be worse than his bite during his first term in office, the restraints have come off this time around given the changed nature of his Administration which is much more ideological in nature. That said, Trump has consistently espoused an “America first” strategy – the clue was always in the name – and the President is only acting in line with the Henry Kissinger doctrine that “America has no permanent friends or enemies, only interests.”
One reason for misreading Trump is that his definition of American interests differs from those who see American leadership as rooted in alliances, democratic values and global stability. In this framework, the US sees itself as a stabilising force in global affairs, willing to bear costs to uphold a rules-based international order which allows it to exert its soft power. By contrast, Trump prioritises transactional relationships and a narrower, more nationalist view of US interests, placing more emphasis on short-term gains, economic advantage and the assertion of US sovereignty over collective global commitments. This explains his scepticism towards NATO; his withdrawal from international agreements like the Paris Climate Accord and the WHO, and his willingness to engage with authoritarian leaders based on perceived strategic or personal benefit rather than ideological alignment. For those accustomed to the traditional American foreign policy playbook, this divergence creates misunderstanding. Critics may interpret his actions as erratic or uninformed when, in reality, they follow a consistent logic – one that prioritizes strength, economic leverage, and a rejection of international obligations that he perceives as constraints rather than assets.
But this does not mean that the strategy is optimal – certainly not for the western allies, nor indeed for the US. Despite what Vice President Vance might think, the US and Europe share many common values and there is a benefit to keeping one’s allies onside. Indeed, the only country to invoke NATO Article 5 – the principle of collective action in the event that a member of the alliance is attacked – is the United States in the wake of the 9/11 attacks. Elon Musk’s closeness to the Trump Administration may be one reason why Tesla sales have slumped in Europe, falling in March by 36.8% and 63.9% year-on-year in France and Sweden, respectively. This in turn suggests that Europe may be less willing to erect trade barriers against Chinese products if it can supply better and cheaper products than the US (ignoring for the time being that the EU has already imposed tariffs on Chinese EVs). The wider point being that there may well be economic blowback on the US if the Trump Administration fails to recognise the longer-term consequences of its actions.
This time may be different … or it may not
One of the least trustworthy phrases in markets is “this time is different” – one which is invoked every time a new paradigm appears likely to upset the status quo. Consequently, we should be wary of drawing too many conclusions from the current shenanigans emanating from the White House. We cannot know, for example, whether the current breach in relationships within the western alliance will extend beyond Trump’s term in office (whether that will include a third term remains to be seen). History may provide some clues.
In the 1930s, for example, the US pursued a policy of isolationism which advocated non-involvement in European and Asian conflicts and non-entanglement in international politics. This was stoked by Republican Senator Gerald P. Nye, who claimed that American bankers and arms manufacturers had pushed for US involvement in World War 1 for their own profit, costing many lives while not serving US interests. This was compounded by the Great Depression, which forced Americans to concentrate on their domestic economic problems. Had it not been for the Japanese attack on Pearl Harbor in 1941, the world’s geopolitical history might have been very different.
Domestically, there are also parallels with the McCarthy era of the early-1950s when paranoia regarding “reds under the bed” resulted in huge political upheaval in Washington. The parallels are not exact, of course, since history does not repeat exactly, but it does rhyme occasionally and there are some elements of McCarthyism which chime with Trump’s modus operandi. Perhaps most obviously, Senator Joseph McCarthy used anti-communist fears to rally support, claiming that the US was riddled with communists (here for his famous “Enemies from Within” speech in 1950). McCarthy’s suggestion that “a moral uprising [that] will end only when the whole sorry mess of twisted warped thinkers are swept from the national scene” has echoes of Trump’s promise to “drain the swamp” and crush the “deep state”.
Like McCarthy, Trump has initiated attacks on the institutional framework of the United States: In McCarthy’s case, he launched a number of unfounded attacks on prominent individuals while Trump has variously railed against the FBI, the DOJ and the mainstream media. Both used the media to spread their message (quite how McCarthy would have adapted to social media is a fascinating what-might-have-been), sowing dissension and polarisation. Both also suffered a fall from grace with McCarthy’s influence fading after the infamous army hearings of 1954 while Trump has twice been impeached, found guilty of criminal offences and lost a presidential election. But while McCarthy quickly faded from the scene once the Republican Party realised he was more of a liability than an asset, Trump’s political career has bounced back.
Where the parallels end is that Trump controls a major political party with a much wider base of popular support whereas McCarthy was just a Senator with a genius for self-promotion. It may yet be the case that the Republicans abandon Trump if his strategy proves to be ruinous for the US but he will not fade into obscurity as did the Senator from Wisconsin. There are many in the GOP who buy into Trump’s views – his is not a one-man crusade. And while public opinion has indeed shifted against Trump – latest polls put his approval ratings at 47.9% versus 50.5% at the start of February – this is far from catastrophic, and is in any event higher than at any time in his first term (see chart below).
Donald Trump’s political fortunes will depend heavily on US economic prospects. Goldman Sachs recently raised its subjective assessment of a US recession in the next 12 months from 20% to 35% while JP Morgan puts the prospect of a global recession at 40%. These numbers suggest that the odds are still against a downturn but they are rising. Moreover, given the strength of the economy bequeathed to Trump, voters may not be very forgiving of a self-inflicted economic downturn, especially if tariffs have a material impact on the prices paid by American consumers. What really matters from a political perspective is the depth of any recession. It is possible that the Administration could spin a mild correction as the price for taking back control though that might be a risky strategy. But a more aggressive downturn would unlikely play well, given the impact this will have on jobs and incomes. With the US midterm elections scheduled for November 2026, Republican party strategists will be aware that such an outcome runs the risk that they will lose control of Congress.
Key takeaways
The commentariat has spilled much ink in predicting the implications of a Trump presidency and while history suggests it is wise to ignore some of the more excitable predictions, there is little doubt that we are operating in changed geopolitical circumstances. Europe no longer considers the US a reliable partner, and while that may change post-Trump, governments do not have the luxury of time to wait him out. As The Economist put it: “There was a time when America’s allies could count on it to do right by them, even if they got into arguments. These days, by contrast, America’s allies have to prepare for the worst.” As for Trump’s domestic position, it is too early to tell whether voters are buying into his economic strategy. But polling evidence does suggest that there has been a sharp rise in the share of Republican voters who believe the EU is unfriendly – perhaps hardly surprising in view of Trump’s claim that the EU was “formed in order to screw the United States”. By the same token, European voters clearly have a less positive view of the US.
Whether the “special relationship” between the US and Europe can recover from this remains to be seen. As in a marriage, once one partner demonstrates reduced commitment, it reduces the incentive of the other party to hold it together. At the very least, this will lead to estrangement; at worst, divorce. But even a divorce can be amicable.
