The increasingly adversarial relationship between the Trump administration and traditional US allies is inadvertently strengthening China’s geopolitical position, according to Krishna Guha, Vice Chairman of Evercore. This undermines what was initially a key objective of Trump’s second term.
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Before Trump’s second term, China was apprehensive about the US leveraging its alliances in Europe, Asia, and North America to counter China’s influence. Beijing was particularly concerned about potential pressure to adopt US technologies and trade countermeasures, Guha explained in a recent CNBC interview.
A Shift in Global Dynamics
However, the current situation reveals a stark contrast. The first few weeks of the new administration have been marked by escalating conflicts between the US and its traditional allies, including Canada and the European Union. This discord, exemplified by proposed tariffs on Canadian and Mexican goods and similar measures against the EU, creates a favorable environment for China.
Further exacerbating tensions, a recent meeting between Trump and Ukrainian President Volodymyr Zelensky devolved into a heated exchange, prompting strong reaffirmations of support for Ukraine from European leaders. This incident underscores the growing rift between the US and its European partners. Concurrently, while tariffs on Chinese goods are already in place, with more planned, Trump’s focus remains largely directed at transatlantic disputes. He recently declared that the European Union’s purpose was to “screw the United States.”
European Backlash and Trade War Risks
This rhetoric has sparked considerable backlash in Europe. Donald Tusk, former President of the European Council, countered Trump’s assertions, emphasizing the EU’s foundational goals of peace, international respect, fair trade, and strengthening transatlantic ties.
While acknowledging the inherent asymmetry in trade leverage favoring the US over Europe, Guha cautioned against underestimating the EU’s economic power and its potential to inflict significant damage in a retaliatory trade war. He highlighted the US economy’s reliance on domestic demand, while Europe is more dependent on global demand, making it potentially more vulnerable. Despite this imbalance, a full-blown trade war would be detrimental to both sides.
Conclusion: A Call for De-escalation
Guha emphasized the importance of avoiding a transatlantic trade war, urging a de-escalation of tensions for the benefit of all parties involved. The current trajectory, where disputes with allies overshadow strategic competition with China, ultimately benefits Beijing and weakens the US’s global standing. The unintended consequence of Trump’s approach is a shift in the global balance of power, potentially strengthening China’s position at the expense of American influence.
