A second Trump presidency threatens to upend Europe’s stability with trade wars, NATO confrontations, and climate clashes on the horizon.

The reality of a second Donald J. Trump presidency carries stark implications for Europe. Trump’s trade and foreign policy as well as his administration’s general disposition towards the climate emergency is likely to upend the status quo and reshape transatlantic relations in ways that could challenge European leaders. His administration’s approach to trade may see a revival of tariffs and protectionist measures targeting European industries, potentially escalating tensions with key EU economic sectors. On foreign policy, a return to transactional diplomacy and scepticism toward multilateral institutions could undermine NATO’s cohesion, leaving Europe to reassess its security strategies. Furthermore, his rollback of climate commitments, such as re-exiting international agreements or defunding green initiatives, may stall global climate cooperation, leaving Europe isolated in its efforts to combat climate change. These shifts will surely compel European leaders to recalibrate their strategies by fostering deeper regional integration or seeking partnerships beyond the traditional Atlantic alliance.

Geopolitical and Foreign Policy Implications

Europe’s Security/NATO

A second Trump administration could significantly impact Europe’s security landscape and the future of NATO. Trump’s ‘America First’ policies represent a fundamental re-evaluation of the USA’s commitments abroad, potentially leading to a reduced American presence in European defense. This shift may compel European nations to assume greater responsibility for their own security, accelerating initiatives toward strategic autonomy, going far beyond efforts and pronouncements made by European leaders during Trump’s first administration. Indeed, Trump has explicitly questioned U.S. security guarantees to European partners including NATO’s Article 5, its mutual-defense clause.

The incoming Trump administration is likely to herald a transformative shift in transatlantic relations, diminishing the U.S.’s traditional role as Europe’s security guarantor. This change stems from long-standing frustrations over Europe’s defense spending and America’s growing focus on East Asia, particularly China’s rising influence. However, an abrupt U.S. withdrawal could destabilise NATO and fragment European security, undermining transatlantic cooperation on crucial issues like Ukraine-Russia policy and China-focused export controls for AI and strategic technology.

The appointment of NATO Secretary General Mark Rutte offers a potential diplomatic advantage, as his somewhat-positive rapport with Trump developed during his premiership of The Netherlands, as well as his pragmatic approach, could help ease transatlantic tensions. Europe’s strategy should prioritize increased defense spending and capability development – meeting and potentially exceeding NATO’s 2% GDP defense benchmark – while addressing military gaps and strengthening forward deployments in Eastern Europe.

Key initiatives at the 2025 NATO Summit scheduled to take place in June in The Hague could include redefining NATO’s strategic roles: NATO focusing on European defense, the EU addressing southern conflicts, and the U.S. concentrating on Asian security. Europe must also prepare for long-term commitments in Ukraine, including potential NATO or EU memberships and post-conflict reconstruction. Enhanced European contributions to global security, from freedom-of-navigation exercises in Asia to nuclear strategy adjustments, could further stabilise NATO.

A carefully managed U.S. pullback, guided by collaborative strategies and a strengthened European pillar within NATO, could enhance European autonomy while preserving alliance cohesion—crucial for Western unity in an era of intensifying global competition.

European partners must avoid being trapped by narrow American commercial interests, as Trump will likely demand that increased military spending favour American defence companies, reinforcing dependency.

Regarding NATO, Trump will likely make his demands early in his second term, before the Hague summit. His confrontational tendencies could lead to serious scenarios: a full NATO withdrawal, a partial withdrawal of forces and funding, refusing to appoint an ambassador or supreme allied commander, or boycotting the summit entirely.

Long-term, Europe’s best interest lies in developing a more cohesive, independent defense strategy with integrated military spending – perhaps even establishing a European NATO. While Friedrich Merz, Germany’s likely new Chancellor, supports a more assertive European defense posture, he remains committed to NATO and does not advocate complete independence from the USA. Time will tell whether his pragmatic approach can withstand Trump’s confrontational style.

The UK, too, faces tough choices regarding its own security strategy and defense policy. Under a reinforced Trump’s ‘America First’ policy landscape, the UK could see new pressures to increase defense contributions, particularly in the Indo-Pacific, aligning with U.S. strategic priorities to counter China. Additionally, a second Trump administration might emphasize bilateral trade-offs in defense cooperation, potentially tying military support or intelligence sharing to broader trade or geopolitical negotiations. For the UK, this would necessitate balancing its ‘Global Britain’ ambitions with the potential unpredictability of U.S. foreign policy under Trump. If Trump again questions NATO’s collective defense obligations or pursues a transactional approach to alliance management, the UK will be forced to recalibrate its defense and security strategies in Europe and beyond.

Climate International Agreements

The incoming Trump administration can profoundly disrupt the global climate governance framework, with significant implications for European partners and their international commitments. Trump’s past scepticism of multilateral climate agreements – epitomized by the USA’s withdrawal from the Paris Agreement in 2020 – signals a potential retrenchment of American leadership in climate diplomacy. This shift would place Europe at the forefront of global climate action, compelling EU leaders to fill the void left by Washington and recalibrate their strategies to maintain momentum on critical initiatives.

The Trump administration’s approach to climate policy is expected to center on domestic deregulation and fossil fuel promotion, with a sharp reduction in federal funding for international climate programs. Such a stance could undermine global trust in the United States as a partner, embolden major emitters like China and India to delay or dilute their commitments, and weaken mechanisms for coordinated action under the UN Framework Convention on Climate Change (UNFCCC). Europe, as the remaining anchor of multilateral climate efforts, would face increased pressure to lead diplomatically and financially.

European strategy should prioritise sustaining the Paris Agreement’s framework by strengthening alliances with other major emitters and developing nations. Key partnerships with countries such as China, which has shown mixed signals on climate leadership, could become pivotal in maintaining global momentum. Simultaneously, Europe must bolster financial contributions to climate adaptation and mitigation funds, offsetting the likely shortfall from the U.S. and ensuring that vulnerable nations remain engaged in the multilateral system.

The European Green Deal, already a cornerstone EU policy, could be accelerated in response to U.S. disengagement. Enhanced carbon pricing mechanisms, as well as increased renewable energy investments, and cross-border initiatives such as the proposed Carbon Border Adjustment Mechanism (CBAM), could position Europe as a global climate leader. However, Europe must also manage the economic implications of these policies, particularly in maintaining competitiveness vis-à-vis the USA, which may continue to leverage deregulation to attract energy-intensive industries.

At the international level, a second Trump administration would likely obstruct efforts to advance key climate initiatives, such as the Global Stocktake process under the Paris Agreement or new agreements on methane reductions and deforestation. European negotiators must prepare to navigate these roadblocks by pursuing coalition-building strategies with willing partners and leveraging forums like the G20, where the EU could isolate U.S. opposition while advancing global commitments.

Domestically, Europe should anticipate the indirect consequences of U.S. climate retrenchment, including a potential rise in climate scepticism among European populist movements. Strengthened public communication campaigns and demonstrable economic benefits from green initiatives could help counter these narratives.

Europe should also prioritize energy diplomacy to mitigate geopolitical risks. For instance, the Trump administration’s emphasis on energy exports, particularly liquefied natural gas, could challenge Europe’s decarbonisation agenda by creating dependency on U.S. fossil fuels. European investments in renewable hydrogen and energy storage technologies could provide a long-term counterbalance, reducing reliance on both U.S. exports and Russian energy supplies.

Looking ahead, the EU must prepare for contentious dynamics at the 2025 UNFCCC Conference of Parties (COP30), where the Trump administration could adopt obstructionist tactics or withdraw entirely from negotiations. Europe’s best response would involve doubling down on its leadership role, demonstrating tangible progress through internal initiatives while rallying a coalition of like-minded nations to preserve the Paris framework.

Ultimately, while a second Trump administration will present formidable challenges to global climate governance, it also offers an opportunity for Europe to solidify its leadership in the green transition. By leveraging its policy expertise, financial resources, and diplomatic networks, Europe can chart a path toward a more resilient and autonomous climate strategy, ensuring the continuity of international efforts in the face of American retrenchment.

As recently as 20 December 2024, Trump issued a fresh threat of a trade war to the EU, urging Europeans to purchase more American oil and gas or face a barrage of tariffs.

While threats speak volumes, most telling is Trump’s appointment of Howard Lutnick, the CEO of the investment bank Cantor Fitzgerald, to lead the U.S. Department of Commerce. Trump intends to extend the scope of Lutnick’s role, who will also take on the role of U.S. Trade Representative. Taken together, these roles make Lutnick responsible for investigating unfair trading practices and for imposing anti-dumping and anti-subsidy punitive tariffs on competitors in order to protect American domestic industries.

Lutnick’s appointment is congruent with Trump’s trade policy goals. Indeed, he strongly supports tariffs on European car imports as part of a broader protectionist agenda and has argued that these measures would create leverage in negotiations, particularly with countries imposing high tariffs on U.S. goods. Lutnick has spoken at length and in various capacities about his views on tariffs, especially when targeted at European and Japanese car companies.

Such measures are likely to be aimed at protecting sectors such as crude oil refining sector, car parts manufacturing, as well as pharmaceuticals – sectors that comprise the EU’s largest share of exports.

It will take time to discern how the effects of eventual tariffs imposed on European goods will be felt across the European economy.

This analysis is a contribution made by Ricardo Morais, Senior Analyst at SET Advisory.