A balance to be rebuilt

The “McKinley moment” evoked by Donald Trump, speaking of US tariffs, is not only a specific reference to American presidential history, it also signals a kind of revolution in the approach to the international system. The leading nation of the old “liberal order,” and of the “triumphant” phase of the old globalization, has chosen a different path that focuses on reducing the trade deficit, increasing revenue with tariffs (partly balancing tax cuts) and moderate the vulnerabilities of interdependence. Trump’s America believes that the costs of the old order are now greater than the benefits. It is the end of the pax americana, the dominant framework for several decades.

We know that the Tariff Act of 1890, advocated by William McKinley even before he became president, was a turning point in US trade policy, increasing the average duties on imports from 38 percent to 50 percent. That protectionist measure—which for the Trump supporters remains a legendary example of effectiveness and sovereignty—strengthened specific industrial sectors, but also caused price hikes, trade retaliation and a growth crisis that forced, a short time later, a rebalancing toward more open trade policies. Will it end like that again? So far, the most pessimistic predictions on the effects of the tariffs announced by Trump last April have proven to be overblown. At the very least, the effects will need more time to be fully revealed. And the reality is that—amidst agreements, exemptions and legal appeals—the much-touted “reciprocal tariffs” have been applied only in part. Nor can we rule out that the US Supreme Court will overturn the legal basis for Trump’s decision, namely the application of the International Emergency Economic Powers Act. The economic effects would probably remain limited; but the expansion of presidential powers would be halted—demonstrating the continuing validity of the US system of “checks and balances.”  

Reciprocal tariffs and the US–China–Europe triangle

In recent months, after the unilateral announcement of “reciprocal tariffs,” trade diplomacy has found itself a space in negotiations. Summit dialog between the US and China has produced a temporary truce, in part provoked by China’s blockade of “rare earth” exports to America. The truce is just an exercise in “damage control”—it merely postpones the problem—but it also demonstrates that the world’s two largest economies are now too interconnected to enable any real “decoupling.”

The public debate in the United States oscillates between a desire to protect or even rebuild traditional sectors of domestic industry (which is unrealistic because of the costs it would entail) and an awareness of the possible damage caused by tariff shocks. A survey by the Case Western Reserve Trade Conference showed that a majority of Americans fear negative effects on their finances and inflation: the cost of food, despite election promises, remains high. Among other things, this is giving rise to exemptions in trade agreements with Latin American countries.

In reality, the negative effects of tariffs are, for now, quite limited for America (not least because of the numerous sector-specific exemptions, legal appeals and so on). The backlash, rather than impacting the United States, is mainly reflected in Europe, which is absorbing the competitive pressure of Asia and the US. China, faced with a decline in its exports to the United States, is indeed tending to redirect its excess capacity towards Europe, which, from a geographical and economic standpoint, finds itself squeezed between the two giants.

From the Chinese perspective, the situation is no less complicated, on the contrary. Despite media narratives insisting on the “unstoppable” rise of China, systemic fragilities remain unresolved. What was once the Middle Kingdom is seeking to strengthen its domestic market, but there remain restraining factors brought about by the stagnation of demand, an aging population, weak soft power, and the limitations of a model now suffering not only from the real estate crisis but also from a sharp decline in foreign investment. Whether China has already won—as some of domestic and international observers seem to think—is yet to be proven, despite its undoubted technological development. The construction of an alternative economic order—based on the enlarged BRICS, with Beijing serving as pivot—remains a fragile project, struggling with the weakness of many of the economies involved and the conflicting interests of member countries. In the meantime, Chinese industrial dumping to Europe is fueling tensions between the two.  

The EU: defense, industry and transition

The EU—which has lost the references of its old development model (cheap energy imports from Russia, defense delegated to the US, exports to China)—is forced to rethink its strategies in a context where trade defenses, energy costs and data dominance are redefining powers and vulnerabilities. The goal of true European autonomy remains for now an illusion, given the dependence in the defense sector and the lag in technology. The necessary investments are lacking. That said, something is beginning to move, starting with the central economy, Germany.

The Federal Republic of Germany, the historic custodian of European mercantilism, is partly changing course. Chancellor Merz is convening summits on steel and proposing a “patriotic” German/European strategy: punitive duties against Chinese dumping, incentives for domestic production and defense of environmental standards as competitive leverage. Behind these choices weighs the crisis of industrial supply chains and the storm of energy prices. The federal government is promoting a new phase of systemic defense, backing EU measures to halve duty-free imports and double tariffs on surplus imports, while calling on Brussels for both a strong industrial policy and direct subsidies to lower energy prices for strategic enterprises.  Germany, having reconsidered its constitutional budget limits, is now investing—including in defense. And it is calling on other European countries to do the same, while remaining opposed to any further forms of shared European debt. 

The goal, as explicitly stated also by industrial and labor unions, is to avoid the terminal crisis of key sectors for the entire economy, such as automotive, mechanics and infrastructure. And at the same time to ensure that the energy transition, even in its watered-down European version, is truly sustainable. 
 

The central problem of the European Union is the loss of relative competitiveness

The diagnoses are well-established, the prescriptions too, but the decisions (shared investments and converging political will) are still lacking. In the field of trade policy, the Commission holds exclusive powers, but the political authority remains, of course, with the national governments. Whilst in its negotiations China can use concrete instruments of coercion—such as control of rare earth elements—to balance its world position, Europe has a much harder time activating any “negotiating weapons.” Partly because it has fewer of them, if we look at strategic sectors. Partly because it is reluctant to use them. One emblematic example is the web tax and taxation on US tech giants: for various reasons (dependence in defense, for example), the EU has opted for caution and compromise. The recent reform of the AI Act also points in this direction.

The crisis of 2025—marked by temporary truces, reciprocal tariffs and the redefinition of global trade powers—opens up a choice for Europe: recover assertiveness and negotiating capacity or continue with reactive/passive adaptation. And this in a sector—international trade—that remains decisive for a continent that does not possess significant primary resources and essentially survives on imports and exports. As long as negotiating weakness prevails, it will be difficult for Europe, already exposed in the East to the costs and risks of the war in Ukraine, to play a relevant role in the current transition—also due to the internal weakness of some of the core countries. In worst-case but certainly not inevitable scenarios, Europe could end up falling apart. In the best scenario, it will finally be able to react: to do so, however, it will have to invest common resources and adopt a system of governance capable of taking swift decisions capable of responding to these revolutionary times.