Trump's rise is a call for Europe to leave its "mama hotel"

01/21/2025 - Petr Pudil in Hospodářské noviny

■ USA and Europe

With Donald Trump's inauguration as President of the United States, the era of neoliberalism, which thrived on global trade based on the free operation of market entities within a predominantly multilateral legal framework, comes to an end. This was more or less respected by its participants and all parties believed that such a system benefited everyone in the long term.

Trump's epic return to office has been accompanied by indications of his priorities, with international trade being the pursuit of a balanced US trade balance with the rest of the world. As part of a strategic game of world domination, the US could expand into new territories if necessary, and tariffs are becoming a key and powerful tool to further the economic and geopolitical goals of his administration. If this is indeed the case after 20 January, we can speak of an epoch of neo-mercantilism.

The original mercantilism was an economic and political practice applied by Europe between the 16th and 18th centuries. Protectionism will be the primary concern of all economic units and countries of the world, with the stronger states demonstrating and exploiting their power. Finally, states will play a greater and greater role in international trade, becoming a kind of commercial agents or, in the language of a bygone era, foreign trade enterprises. All exporters will have to be on their guard because it is their goods or commodities that will be taxed with duties here or there since the merry-go-round of tariff warfare is relentless and retaliation is not spared. And so we are likely to see the weaponization of business. It will become a weapon, or if you like, a tool in the overreach of the great powers.

There are reasons for this development, and they are not just the whims of a fickle president, as many in the media portray them. The US and the whole of the West made a strategic mistake when it invited China to join the World Trade Organization, giving it the legitimacy of a legitimate participant in the liberal world of global trade that will play by the rules. However, China does not play by the rules and has created a huge imbalance in world trade with its aggressive dumping policies and unprecedented fiscal stimulus for its economy. And in this, of course, we as the West have voluntarily followed suit.

The second reason for the change in development is that this is the first time in modern human history that states do not own and control strategic technologies. The imbalance is large on both issues and has begged for change. For Europe, this is an opportunity to create a new quality in our partnership with the US.

I would liken today's EU to a grown-up offspring who is over 30, has graduated from several universities, speaks five world languages, but still lives in a 'mama hotel' built by the US after the Second World War. And now the new stepfather is telling us to finally leave this house and stand on our own two feet. I see this as a positive message for Europe.

The European Community is the largest market in the world, Europe is the richest region in the world by a wide margin in terms of total savings, and our climate will be the most favorable place to live, even in times of climate change. We need to catch up with the innovation lead of the US and now China, arm ourselves against threats from Russia, and rebuild our energy sector. But without deeper European economic integration, the launch of a European capital market, and common debt financing, we will remain a market that pays for the products of others and becomes poorer.

And what does this mean for the Czech Republic? Our prosperity is linked to Europe, but it will be a large and economically integrated entity with a single market as we know it in the US. Other scenarios leave us at the mercy of the will of the powerful. Europe is our future, and the Czech Republic can change it for the better.

Author: Petr Pudil
The author is co-founder of BPD Partners, has investments in the USA, is an ambassador of the Second Economic Transformation