Pax Americana (1989-2025?)

The inauguration of Donald Trump might be remembered as the date marking the collapse of the international relations system established after the end of the Cold War, which some historians have referred to as Pax Americana. This system was based on the defense of free trade and national borders to ensure prosperity through peace and the self-determination of peoples. The United States not only benefited from this system but also acted as its guarantor, thanks to its dominant military and economic position.

This framework has proven to be highly resilient. Indeed, Pax Americana withstood  the 2007–2008 financial crisis, through extraordinary monetary policy measures, as well as the even greater shock of the pandemic—the second major global economic crisis of the 21st century. The pandemic's effects were mitigated by economic policy tools, fortunately refined during the previous crisis in terms of monetary policy and innovative on the fiscal front, particularly thanks to the European issuance of joint debt.

However, when Russia invaded Ukraine, it became apparent that something was faltering. If the defense of borders is one of the foundational principles international relations in the post–World War II period, why did China and many other emerging countries remain silent when the chorus of protests was raised? Does the order established 35 years ago still stand?

Trump’s electoral victory and his pre-inauguration statements swept the last remaining certainties away. NATO’s role is being questioned. Europeans are wondering if the U.S. would come to their defense should the conflict triggered by Russia escalate. And the territorial claims of the US over Greenland, Panama, and even Canada seem to challenge the sanctity of borders on the Western front as well.

In an already disorienting context, US economic policies are what could harm Europe, just when it’s seeking to strike new balances on essential issues such as security, trade, and energy.

Trump has promised 100 executive orders (directives the President can issue to federal agencies, for instance on tariffs or immigration) within his first 100 days, threatening slap tariffs on European goods. Should these executive orders be overly aggressive, the inflationary effects could be highly damaging, both in the US and around the globe.

Given the new President’s negotiating instincts, however, it is more realistic to expect gradual measures to be meted out against Europeans, coupled with threats of sharp escalations if counterparties fail to concede something in exchange for a reprieve. These concessions could involve purchasing larger quantities of American LNG (liquefied natural gas) to replace Russian supplies, or increasing European financial commitments to Ukraine and national defense, perhaps through the purchase of American weapons.

In this context, Europe will need to negotiate with a unified voice. The worst possible strategy—albeit a sorely tempting one—would be for each country to individually approach Washington, hat in hand, to seek exemptions for their own products.

In this volatile environment, markets will need to keep calm, even if negotiations do not progress optimally.

Trump’s stance will likely be more aggressive with China from the outset. However, as long as tariffs remain bilateral, there are evasion strategies that prevent serious disruptions to global value chains. Over the years, several “connector” countries (Vietnam, Mexico, Indonesia, etc.) have emerged, importing from China and exporting to the United States, effectively acting as redistributors of global trade flows. While trade growth between major blocs is slowing, trade through these connector countries remains largely unaffected.

Clearly, in its trade strategies with the rest of the world, Europe must avoid closing off these channels as well.