Midterms and the EU: Trump slap doesn't make it any easier for Europe

The Democrats' victory in the U.S. midterm elections sparked mixed reactions from economists, business associations and experts in Europe. US trade policy will remain unpredictable and protectionist despite US President Donald Trump's blow to the Republicans, says Achim Wambach, President of the conservative Mannheim Center for European Economic Research (ZEW).

Without a majority in the House of Representatives and Senate, the President is likely to try to advance his “agenda more through trade and foreign policy, where he has extensive options for his own actions,” says Wambach. “No fundamental return of the USA to free trade can be expected” from the new democratic majority, as the parties hardly differ in terms of content when it comes to protecting their own industry. The protectionist orientation of economic policy is not unique to the Trump administration.

The head of the employer-related German Economic Institute (IW) also sees it that way. US tariff policy will continue to slow down the German and European economies, says IW Director Michael Hüther. Trump will probably continue to impose new tariffs by decree, bypassing Congress. The USA is also facing turbulent times domestically. Hüther believes: “Political uncertainty in Germany’s most important trading partner will put a strain on transatlantic trade.”

The SPD MEP and trade expert Bernd Lange warned against viewing a US president without a majority in Congress as a “lame duck”. Trump could become more of an “angry duck” in the coming years, said Lange.

The result of the elections is “good news,” says the President of the liberal German Institute for Economic Research, Marcel Fratzscher. “The majority of Democrats in both chambers of the US Congress is likely to make it more difficult for Trump to continually reignite his trade conflict, especially with Europe,” said Fratzscher. "In addition, Congress can use its budget powers to place greater limits on the war with Iran. This could reduce energy prices, from which Europe would also benefit," says the economist.

According to Fratzscher, the aggressive behavior of US tech companies “could now be curbed to some extent, as the Democrats are committed to regulating AI and will probably be much more critical of the massive boom in the construction of data centers.” According to the economist, this should improve growth prospects, especially in Europe. Fratzscher also thinks that this “should cool down the overheating in the financial markets among tech companies somewhat”. “Trump will also have less freedom and will have to be more accountable” when it comes to financial policy.

Business associations were rather skeptical. The president of the foreign trade association BGA, Dirk Jandura, assumes that Trump's customs policy will continue. “First of all, we are focusing on stability” and an end to the “zigzag course,” says the managing director of the German Chamber of Commerce and Industry (DIHK), Helena Melnikov.

She emphasized that reliability is “extremely important” in the most important export market for German companies. She also advocated continuing to look for “new partnerships beyond the USA”. Melnikov referred, among other things, to the EU agreements with the South American Mercosur states and with India. New collaborations are underway in Asia.

Employer President Rainer Dulger emphasized that Europe's problems would not be solved in Washington: "We have to take our competitiveness into our own hands," he told the T-Online portal. Germany and Europe must “finally do the homework that needs to be done”, i.e. reduce bureaucracy, relieve the burden on companies, make investments easier and strengthen competitiveness. (with agencies)