Trending Now
We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates, including GZERO Media, to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence, and our use of cookies described in our Cookie Policy.
Analysis
Canada’s Liberals and Conservatives are neck and neck as election begins, and running on similar promises
Canada’s federal election is on. The polls show a polarized contest between the Liberals and Conservatives, one dominated by Donald Trump and the question of who’s best-suited to deal with his tariff and annexation threats. Canadian nationalism has surged. The Liberal Party, recently down 25 points in the polls to the Conservatives, have seen their fortunes turn around under new leader and Prime Minister Mark Carney — a manwho’s been all too keen to, ahem, adapt ideas from his top rival.
Liberal, Tory, same old story?
A Trump-centric campaign risks obscuring other important policy issues. But how much does it matter when the two front-runners are so close together? So far, both parties — one of which is running on the slogan “Canada Strong” and the other on “Canada First” – have adopted similar proposals for a range of issues.
Both Liberal and Conservative campaigns launched with promises to cut personal income taxes. The Liberals are offering a 1% cut to the lowest bracket, and the Conservatives are putting forward a 2.25% cut. Both parties are also promising to cut federal sales taxes on new homes for first-time buyers, with Liberals including new builds worth as much as CA$1 million and the Conservatives ramping it all the way up to … $1.3 million, but they’ll expand eligibility to non-first-time buyers, including investors.
On defense, Carney is promising to spend 2% of GDP on the military by 2030 and expand Arctic security. Poilievre has promised more or less the same, with details to come. Both say they’ll speed up the building of energy infrastructure, including oil and gas pipelines, though Carney would keep a Trudeau-era emissions cap on the oil and gas sector, while Poilievre would not.
Affordability remains a major concern, even more so with tariffs threatening the economy. Poilievre even says he’d keep (though perhaps not expand) the Liberals’ public prescription drug, daycare, and dental care programs. Meanwhile, nearly a quarter of Canadians can’t afford food. In 2024, the Liberals launched a food lunch program, which the Conservatives attacked as a headline grab but didn’t outright oppose. The parties haven’t released more on food security and affordability yet, but they almost certainly will.
Can the Liberals rewrite the past?
While the Liberals are now led by Carney, with former Prime Minister Justin Trudeau gone, they’re still the same party that has governed for nearly a decade and earned ire from voters for policy shortcomings. With a policy agenda that, so far, looks similar to that of the Conservatives, the Liberals must persuade voters they’re not just better on policy, but that their guy is better on character and competence, and that his team is fit for purpose.
It’s a tricky task, and it’s fair to ask how much the Liberal Party has changed. Many top candidates and current Cabinet ministers are the same faces from Trudeau’s years, including Chrystia Freeland, Mélanie Joly, Dominic LeBlanc, Bill Blair, and François-Philippe Champagne. The Liberal surge even persuaded a handful of candidates who’d served in the caucus to run again after saying they were out under Trudeau, including high-profile players Anita Anand, Sean Fraser, and Nate Erskine-Smith.
When Carney announced his Cabinet just before he triggered the election, Conservatives were quick to point out that the group contained 87% of the same faces from Trudeau’s table. Among the faces are those who supported, just weeks earlier, policies Carney is now reversing, including the Liberals’ signature consumer carbon price and its planned increase to the capital gains inclusion rate (reversals Conservatives were calling for).
Canada’s “presidentialized” election
A leader-focused campaign in the face of Trump’s threats will, perhaps ironically, be thoroughly American. Graeme Thompson, a senior analyst with Eurasia Group’s global macro-geopolitics practice, notes that the tricky thing for the Liberals is this is a change campaign, with voters looking to reset after the Trudeau years. Carney will have to present himself as that change – which could mean an intense focus on him as leader.
Thompson calls it a “presidentialized” campaign, one that comes with a risk for the neophyte Liberal leader. “It opens the question of Carney’s political experience, or rather lack thereof – and the fact that he has never run an election campaign before, let alone a national general election campaign. It’s an open question whether his political inexperience comes out in a negative way.”
But a focus on character could also set Carney apart from Poilievre, even if the two don’t have much daylight between them on policy. Voters see Carney as the best person to be prime minister, and he enjoys high favorability ratings — over half the country likes him. The Conservative Party leader, on the other hand, isn’t particularly well-liked, with his unfavorables sitting at 59%.
Promise now, worry later?
For all the talk of character, Conservatives, including Poilievre himself, have accused the Liberals of stealing their ideas. That’s a fair criticism. As Thompson puts it, the Liberals have caught the Conservatives out and, indeed, have adopted their positions. But how far will that take the Liberals? And at what cost?
“These are all Conservative policies that were being wielded against Trudeau,” Thompson says, “which Carney has now adopted as his own. And it’s shrewd politicking.” But it’s also risky. “If the Liberals win, they need to deliver very quickly on showing that this is a new government and that they have new policies. The honeymoon period would be, I think, quite short.”
The Liberals will be happy to worry about all of this later. For now, they’re the beneficiaries of an election in which the very issues that were set to spell their doom have become temporarily incidental to Trump and to questions of character and competence – questions to which voters seem to think Carney is the answer.
The policy challenges that got Liberals into trouble in the first place are still lurking and waiting to reassert themselves in short order. But for the Liberals, those are problems for another day.
Donald Trump’s second term is having considerably more impact on the global stage than his first. Trump may have been a largely transactional president last time around, when he was more constrained at home and faced relatively more powerful counterparts abroad. But the first two months of Trump 2.0 have shattered the illusion of continuity. No American ally faces a ruder awakening than Europe, whose relationship with the United States is now fundamentally damaged.
Core partners in Asia like Japan, South Korea, India, as well as Australia worry about being hit with tariffs and will do what they can to defuse conflict, but they also know their geostrategic position vis-à-vis China means Trump can’t afford to alienate them entirely. Accordingly, their relations with Washington should remain comparatively stable over the next four years.
America’s largest trade partners, Mexico and Canada, are facing more significant trade pressures from the Trump administration, but the imbalance of power is such that they have no credible strategy to push back. Everyone understands they’ll have to accept Trump’s terms eventually; the only question is whether capitulation comes before or after a costly fight. Riding an 85% job approval, Mexican President Claudia Sheinbaum has enough domestic political space to yield to Trump’s demands to keep Mexico in his good graces, as she is already doing. By contrast, Canadian leaders have a political incentive to put up a bigger fight because Trump’s threats toward Canada’s economy and sovereignty have sharply inflamed nationalist sentiment north of the border in the run-up to the April 28 elections. However, I expect Ottawa will quietly fold shortly after the vote to ensure that ongoing relations with the US remain functional.
Most US allies have no choice but to absorb Trump’s demands and hope for a reset after he’s gone. But Europe is different. It possesses both the collective heft to resist Trump’s demands and the existential imperative to do so.
Three structural forces render the transatlantic rupture permanent.
First, the European Union has the trade competency and market size to punch back against the Trump administration’s aggressive tariff blitz. Unlike most other US trading partners who lack the economic leverage to go toe-to-toe against Washington and have little choice but to fold under pressure, Brussels’ defiance ensures a protracted trade war with no easy resolution.
Second, most Europeans view the Trump administration’s unilateral pursuit of rapprochement with Russia as a direct threat to their national security. While President Trump would still like to end the war in Ukraine as he promised on the campaign trail, he is prepared to do so on the Kremlin’s terms – and he’s even more interested in business deals with Moscow. He won’t be deterred by a collapse of the Ukraine peace talks, even though it’s Vladimir Putin who’s shown no interest in softening his maximalist demands. Nor will Trump care that the Europeans stridently oppose US normalization with their principal enemy. After all, the United States is protected by two oceans from Putin’s army, and Trump’s embrace of Euroskeptic movements reveals their shared aim: a fragmented and weakened Europe that is easier to dominate.
The president’s rhetoric – echoed by the Signal-gate private texts, Special Envoy Steve Witkoff’s recent interview with Tucker Carlson, Vice President JD Vance’s Munich speech, and so many other pieces of evidence – makes clear that the current administration sees Europeans not as allies but as “pathetic freeloaders” who shouldn’t be “bailed out” as a matter of principle. Even if Washington begrudgingly agrees to provide them with transactional security, Europeans now realize that relying on a hostile US for survival is strategic suicide.
Which brings us to the third and final driver of the definitive US-Europe break: common values … or lack thereof. From free trade and collective security to territorial integrity and the rule of law, Europe’s foundational principles are now anathema to Trump’s America. Just look at Trump’s repeated threats to annex Greenland, to say nothing of his willingness to recognize illegally annexed Ukrainian territories as Russian and support Israel’s annexation of parts of the West Bank and Gaza. For an EU built from the ashes of World War II, it's hard to compromise with a worldview in which borders are mere suggestions and might makes right.
After years of complacency, European leaders seem to have finally gotten the message that the United States under Trump is not just an unreliable friend but an actively hostile power. They understand they need to drastically increase Europe’s sovereign military, technological, and economic capabilities – not just to survive without America but also to defend their borders, economies, and democracies against it. Whether they can muster the political mettle to act on this realization, however, is Europe’s greatest test since 1945.
Recent moves – Germany’s historic debt brake reform and Brussels’ fiscal and financial maneuvers to boost defense spending – hint at urgency. Yet half measures won’t suffice. If Europeans refuse to commit troops to guarantee Ukraine’s post-ceasefire security absent an American backstop and continue to balk at seizing Russia’s frozen assets and overriding Hungary’s veto, it will confirm my view that the bloc lacks the nerve to survive in a jungle-ruled world where Trump and Putin refuse to play by any rules.
The irony is that Europe has the resources and capacity to stand up for itself, its values, and its fellow Europeans. What’s missing is the collective courage to act like it’s 1938, not 1989. For Ukraine’s sake and its own, that needs to change.
But when the Chinese startup DeepSeek released its AI models in January, claiming they matched American ones in performance at much cheaper prices to develop, the US lead was suddenly called into question. If DeepSeek can be believed, they achieved a huge technological advance without unfettered chip access — an affront to the US government’s export controls that, it thought, were keeping China at bay.
After DeepSeek, China is emboldened
Now, the Chinese tech industry seems emboldened, with a slew of new releases from startups and incumbents alike. This breakthrough has jumpstarted AI development across China that has, in an instant, changed global tech competition and reshaped Beijing’s tech strategy.
Alibaba, Tencent, and Baidu, along with newcomers like Manus AI, have since released their own advanced models. Many of these are available for free as open-source software, unlike the subscription models of OpenAI and others.
“DeepSeek shifts the narrative — not by immediately putting China ahead, but by undermining America's AI dominance and forcing Silicon Valley giants onto the defensive much sooner than anticipated,” said Tinglong Dai, professor at Johns Hopkins Carey Business School.
“DeepSeek did two things: increase confidence in China's ability to innovate and convince policymakers to push hard on tech advancement now,” said Kenton Thibaut, senior resident China fellow at the Atlantic Council's Digital Forensic Research Lab.
At a press conference earlier this month, Chinese Foreign Minister Wang Yi wrote off America’s strict export controls. “Where there is blockade, there is breakthrough,” he said. “Where there is suppression, there is innovation; where there is the fiercest storm, there is the platform launching China’s science and technology skyward like the Chinese mythological hero Nezha soaring into the heavens.”
Beijing’s shifting focus
After DeepSeek, Thibaut notes, the Chinese government has signaled it will expand support to finance technological innovation — increasing its relending program budget, establishing a new national venture capital fund, allowing unprofitable firms to go public, and increasing mergers and acquisitions in the Chinese tech sector.
This is a major shift from just a few years ago when Beijing sought to put the explosive domestic tech sector in its place — infamously sinking the IPO of the rideshare giant Didi and closing a key loophole for companies going public on foreign markets in 2021.
Beijing’s incentives are now “aligned” with developing the domestic tech sector, Thibaut said, “Both are aligned on the understanding that companies have major incentives to localize — i.e. using domestically produced chips, even if they aren’t as good as NVIDIA’s — in the long term because of just how uncertain and unpredictable chip availability is and will be.”
And China's embrace of open-source AI models, which are freely available for the public to download and modify, has also raised eyebrows because it stands in contrast with the mostly closed Western models, with Meta’s Llama as a notable exception. If China can get its open-source models to be commonly used by Western developers, it could make an important stake in the global AI space. That said, the open-source model could hinder the economic benefits of AI in China — at least, in terms of making money directly off of these advancements.
For now, we’re witnessing a moment of confidence for China — one shared by both its government and tech sector. “Xi Jinping surely feels emboldened,” Dai said, “viewing this as tangible evidence of Western vulnerability and China’s rising trajectory.”
Last Thursday, Justin Trudeau’s last full day as prime minister, Donald Trump was emphatic in his desire to force Canada to join the United States during a press event in the Oval Office.
“Canada only works as a state,” he said, referring to the border as “an artificial line” and suggesting that Canschluss — a play on the term Anschluss, denoting Nazi Germany’s annexation of Austria in 1938 — is just a matter of time.
“There will be a little disruption, but it won’t be very long. But they need us. We really don’t need them. And we have to do this. I’m sorry.”
On Friday, former central banker Mark Carney was sworn in as Canada’s prime minister. In his first news conference, he called Trump’s comments “crazy. That’s all you can say.”
For a few days, Trump didn't repeat his threats, which opened up the possibility that he merely enjoyed dunking onTrudeau, whom he seems to despise, and would now move on. But it was likely that the US president was just busy — carrying out airstrikes in Yemen, deporting migrants to El Salvador, and trying to negotiate a ceasefire in Ukraine.
On Tuesday night, in an interview with Fox News, Trump angrily denounced Canada again, said he doesn’t care if his comments cost the Conservatives the election, and said Canada is “meant to be our 51st state.”
Trump is so toxic in Canada that Conservative Leader Pierre Poilievreseized on the comment as evidence that he, not Carney, is the champion the country needs.
Trump’s continued trash talk may show that his fixation is too deep to be deterred by the disinclination of Canadians to be annexed, which is setting him up for a showdown with the new prime minister.
People who know Carney think he may be better equipped to respond than Trudeau was.
Anthony Scaramucci, who became friends with Carney at Goldman Sachs many years ago, and who briefly worked for Trump in 2017, said on MSNBC that the president likely doesn’t want a fight with Carney, who he described as a “very, very tough guy.”
“I don’t think the administration really wants to fight with him,” said the Mooch. “He has energy on his side. He has electricity on his side.”
Trudeau looked weak
Trump and Carney have not yet had the traditional congratulatory call but, on the other hand, he is not yet calling Carney governor — which would be ironic, since he previously served as governor of both the Bank of Canada and the Bank of England.
It may be that Trump had a special desire to bully Trudeau, who was an unpopular lame duck when Trump was elected.
“Trump, as everybody knows, has an unerring instinct for the weakness of a counterparty, and he seeks to exploit that and control them for it,” says Graeme Thompson, a senior analyst with Eurasia Group.
The White House will have noticed that Canadians now have their backs up, says Jamie Tronnes, executive director of the Center for North American Prosperity and Security, and are unified around the idea of “sticking it” to the Americans.
“It really has changed the way in which they will be able to negotiate with the United States in an upcoming [trade] renegotiation. It doesn’t matter who the leader of the Canadian government is. That person is going to have to represent the national mood, and the national mood is not conducive to cutting a deal with the United States.”
And Trump appreciates muscle. After blustery Ontario Premier Doug Ford threatened to impose a 25% tariff on electricity exports to the United States, Trump threatened him into backing down, and then praised him as “a very strong man.”
Thompson notes that Trump has been respectful to Ford, who just won a majority, and Mexico’s president, Claudia Sheinbaum, who enjoys overwhelming support among Mexicans.
“I think that whoever ends up on the other side of the Canadian election, if they get a majority, that would be the most powerful thing in Carney or Poilievre’s pocket, in terms of relations with the Trump administration.”
An election on tackling Trump
For Carney, everything depends on managing Trump, since he has the power to badly damage Canada’s economy with tariffs.
Carney is trying to show strength. After being sworn in, he flew to Europe to meet with French President Emmanuel Macron and British Prime Minister Keir Starmer to “strengthen ties with reliable allies,” which seemingly no longer includes the United States.
After flying back to the Canadian Arctic, Carney announced that Canada would buy a CA$6 billion radar system from Australia, getting it before the Americans. He also has asked for a review of the planned CA$19 billion purchase of 88 F-35 fighter jets from the United States, “given the geopolitical environment,” although the Americans might be able to use technology-sharing agreements to block Canada from purchasing alternatives.
Last week, Portugal announced it would buy European jets rather than F-35s because of America’s new hostility toward traditional allies, so the Canadian announcement would seem like bad news for politically powerful American supplier Lockheed Martin. This would normally be the kind of thing to get a president’s attention.
Carney, who has met Trump at international conferences and been involved in business deals with Jared Kushner and Elon Musk, will highlight his economic and crisis-management experience in the upcoming Canadian election, which could start as soon as Sunday.
Polls show, in a dramatic reversal, that Canadians now favor Carney over his Conservative rival, who is promising to stand up to Trump but whom Carney has linked to the MAGA movement.
Carney is campaigning on taking a hard line. In London, he said he didn’t intend to negotiate with Trump until he stopped threatening to make Canada the 51st state.
“We’ve called out those comments,” he said. “They’re disrespectful, they’re not helpful, and they need to stop. They will have to stop before we sit down and have a conversation about our broader partnership with the United States.”
But Trump shows no sign of stopping, and if he doesn’t, it’s unclear what Carney — or Poilievre — can do. Both leaders talk about diversifying trade, but it would take years to build the transport infrastructure to make a major shift workable. In the short term, a showdown with a hostile neighbor looks inevitable.
Last week, the US and Ukrainian governments agreed to pursue a 30-day ceasefire with no preconditions. Putin said yesterday on that call that he agrees – as long as the halt to fighting applies only to strikes on energy infrastructure, a major military target for both sides in recent months. That’s far short of the pause on fighting by land, sea, and air that Trump wanted, though Putin did say he was also ready to talk about a pause on attacks on Black Sea shipping. (Clearly, the Russian president is tired of daily briefings on the successes of Ukrainian air and sea drones.)
In the meantime, Russian forces will continue to push for more territorial gains on the ground, and Russia remains free to launch air attacks on civilian populations. We saw more of that last night. Since spring is here and power losses will no longer leave Ukrainians in the freezing cold, the promise to hold off on attacking energy infrastructure costs Russia little.
Putin offered Trump enough to encourage the US president to continue talks on a broader US-Russia rapprochement, one that includes benefits for both economies. Trump also has no reason to begin insisting that Ukrainians and Europeans participate in future negotiations, another prize for Putin.
Any halt or slowdown in the intensity of attacks will keep more civilians alive, at least for now. That's good news, and there's likely to be further movement toward a broader ceasefire at some point later in the year, maybe by the end of April.
But a durable peace agreement is another question. Putin made clear to Trump that he has some bright red lines that must be respected. For example, the Russian president insisted there could be no ongoing military and intelligence support for Ukraine from either the US or Europe. (The US readout of the call doesn’t mention that, but the Kremlin version does.) Ukraine’s Volodymyr Zelensky will turn quickly to the Europeans for help, and he’ll get it. Neither Ukraine nor Europe has any reason to accept an end to support for Kyiv. That will be a large problem for Trump in getting the big-splash peace deal he wants.
Still, Trump might soon argue that Ukraine and its Euro allies are the obstacle that prevents a temporary ceasefire from blossoming into permanent peace. If so, Putin will miss out on a peace deal he doesn’t want in exchange for a big new opening with the president of the United States.
That’s where Trump and Putin have left it. From his visit yesterday to Finland, Zelensky offered a positive preliminary appraisal of the energy infrastructure ceasefire, but with some big caveats. He said that he’ll have a “conversation with President Trump” where he’ll try to read the fine print on Trump’s exchange with Putin. That call happened earlier today. He called on Russia to free all Ukrainian prisoners of war as a gesture of good faith, and he vowed to keep Ukrainian troops inside Russia’s Kursk region “for as long as we need.”
But the energy ceasefire is essentially a scaled-back version of the proposal for a long-range airstrike halt and naval truce that Zelensky offered before the US-Ukrainian meeting last week in Saudi Arabia. If Ukraine’s president does fully endorse the idea, Europe will quickly get to yes too. Ukraine and the Europeans will then try to work toward winning a broader ceasefire that puts the Kremlin back on the spot. For now, that prospect looks doubtful.
Sadly, today’s news on Ukraine sounds a lot like what we’ve seen in Gaza where, as hard and time-consuming as it was to get that first ceasefire, a move to phase two will yield a lot fewer points the two sides can agree on. And as with Gaza, when that first ceasefire comes to an end, expect a new burst of deadly violence.
That’s why it’s hard to be optimistic that yesterday’s bargaining has moved us any closer to a true and lasting peace, the outcome all sides say they want.
The Trump White House has received thousands of recommendations for its upcoming AI Action Plan, a roadmap that will define how the US government will approach artificial intelligence for the remainder of the administration.
The plan was first mandated by President Donald Trump in his January executive order that scrapped the AI rules of his predecessor, Joe Biden. While Silicon Valley tech giants have put forth their plans for industry-friendly regulation and deregulation, many civil society groups have taken the opportunity to warn of the dangers of AI. Ahead of the March 15 deadline set by the White House to answer a request for information, Google and OpenAI were some of the biggest names to propose measures they’d like to see in place at the federal level.
What Silicon Valley wants
OpenAI urged the federal government to allow AI companies to train their models’ copyrighted material without restriction, shield them from state-level regulations, and implement additional export controls against Chinese competitors.
“While America maintains a lead on AI today, DeepSeek shows that our lead is not wide and is narrowing. The AI Action Plan should ensure that American-led AI prevails over CCP-led AI, securing both American leadership on AI and a brighter future for all Americans,” OpenAI’s head of global policy, Christopher Lehane, wrote in a memo. Google meanwhile called for weakened copyright restrictions on training AI and “balanced” export controls that would protect national security without strangling American companies.
Xiaomeng Lu, the director of geo-technology at the Eurasia Group, said invoking Chinese AI models was a “competitive play” from OpenAI.
“OpenAI is threatened by DeepSeek and other open-source models that put pressure on the company to lower prices and innovate better,” she said. “Sam [Altman] likely wants the US government’s aid in wider access to data, export restrictions, and government procurement to boost its own market position.”
Laura Caroli, a senior fellow of the Wadhwani AI Center at the Center for Strategic and International Studies, agreed. “Despite DeepSeek’s problems in safety and privacy, the real point is … OpenAI feels threatened by DeepSeek’s ability to build powerful open-source models at lower costs,” she said. “They use the national security narrative to advance their commercial goals.”
Civil liberties and national security concerns
Civil liberties groups painted a more dire picture of what could happen if Trump pursues an AI strategy that does not attempt to place guardrails on the development of this technology.
“Automating important decisions about people is reckless and dangerous,” said Corynne McSherry, legal director at the Electronic Frontier Foundation. The group submitted its own response to the government on March 13. McSherry told GZERO it criticized tech companies for ignoring “serious and well-documented risks of using AI tools for consequential decisions about housing, employment, immigration, access to benefits” and more.
There are also important national security measures that might be ignored by the Trump administration if it removes all regulations governing AI.
“I agree that maintaining US leadership in AI is a national security imperative,” said Cole McFaul, research analyst at Georgetown University's Center for Security and Emerging Technology, which also submitted a response that focused on securing American leadership in AI while mitigating risks and better competing with China. “OpenAI’s RFI response includes a call to ban the use of PRC-trained models. I agree with a lot of what they proposed, but I worry that some of Washington’s most influential AI policy advocates are also those with the most to gain.”
But even with corporate influence in Washington, it’s a confusing time to try to navigate the AI landscape with so many nascent regulations in Europe, plus changing signals from the White House.
Mia Rendar, an attorney at the law firm Pillsbury Winthrop Shaw Pittman, noted that while the government is figuring out how to regulate this emerging technology, businesses are caught in the middle. “We’re at a similar inflection point that we were when GDPR was being put in place,” Rendar said, referring to the European privacy law. “If you’re a multinational company, AI laws are going to follow a similar model – you’ll need to set and maintain standards that meet the most stringent set of obligations.”
How influential is Silicon Valley?
With close allies like Tesla CEO Elon Musk and investor David Sacks in Trump’s orbit, the tech sector’s influence has been hard to ignore. Thus, the final AI Action Plan, expected in July, will show whether Silicon Valley really has pull with the Trump administration — and, specifically, which firms have what kind of sway.
While the administration has already signaled that it will be hands-off in regulating AI, it’s unclear what path Trump will take in helping American-made AI companies, sticking it to China, and signaling to the rest of the world that the United States is, in fact, the global leader on AI.
Bottles of Champagne are seen on display for sale in a wine shop in Paris, France, on March 13, 2025.
The party ended abruptly last week, and the last bottle of European champagne may have popped.
After President Donald Trump imposed 25% tariffs on all steel and aluminum imports, US allies quickly announced countermeasures. This included a European Union plan to introduce 50% tariffs on US whiskey. Further accelerating any impending trade war, Trump responded by threatening a 200% tariff on all EU wines, champagnes, and alcoholic products. In the words of former President Thomas Jefferson as interpreted by Lin-Manuel Miranda in “Hamilton,” “Look, when Britain taxed our tea, we got frisky. Imagine what gon’ happen when you try to tax our whiskey.”
European leaders caught between the rock of needing Trump to help bring an end to the war in Ukraine (while they aim to beef up collective defense) and the hard place of fearing economic contraction from US tariffs are quickly realizing that nobody is having fun anymore.
Lessons of a tariff man
As Europe and others look to rebound from the latest round of the Trump administration’s trade offensive, a few misguided lessons are being drawn. The first is about Trump’s attachment to tariffs and protectionist trade policy. Many headlines in recent weeks have propelled a narrative of the Trump “whipsaw” or the view that the administration quickly U-turns on trade policy. Examples like the retreat on Colombia or the initial deferral for Canada and Mexico are frequently cited as evidence of the tendency toward reversals. What these perspectives underappreciate, however, is both how longstanding Trump’s regard for tariffs has been, and how fundamental the administration sees it to its broader policy objectives. The concession-reprieve cycle is the noise, while economic security as national security is the signal.
Trump’s zest for tariffs dates back to the 1980s and was widely written about during his first administration. Now, this four-decade history seems to have been overtaken by disorientation and incredulity. In an interview given in 1989, Trump reportedly said “America is being ripped off … We’re a debtor nation, and we have to tax, we have to tariff, we have to protect this country.” Taking to social media last week, Trump echoed these sentiments, posting, “The US doesn’t have Free Trade. We have ‘Stupid Trade.’ The Entire World is RIPPING US OFF!!.” In short, there is no new Donald Trump.
But it is not just that Trump may be ideological about tariffs; it is also that he and his team have placed these beliefs at the center of their second-term ambitions. In a Day 1 presidential action, the administration announced that “Americans benefit from and deserve an America First trade policy.” For the Trump administration, “America First trade” means promoting investment and productivity, enhancing US industrial and technological advantages, and defending economic and national security to benefit American workers. Each of these objectives will be backed up by efforts to address unfair and unbalanced trade – tariffs and other measures – and wider economic security considerations, including reviews and investigations, with special attention given to economic and trade relations with the People’s Republic of China. The administration has laid it all out by executive action. When Trump orders the creation of an External Revenue Service to collect tariffs, duties, and other foreign trade-related revenues, he plans to collect the money.
Missed connections
The other lesson that should be gleaned from what has unfolded in recent weeks between the US and its allies, particularly in Europe, is about a mismatch in intentions. Trump and his trade team believe that protectionist policies will restructure the global trade system in favor of US industrial and manufacturing strength. Imposing tariffs across the board on steel and aluminum is aimed at reigniting the US metals industry, whether this comes to fruition will take years to assess.
When Europe responds to industrial tariffs by targeting goods with only limited substitutability like US whiskey, the goal is to find a pain point and apply leverage. The downside of such an approach, however, is exactly what analysts, the financial market, and those targeted by US tariffs have lobbed at Trump: It will be domestic consumers that are most hurt. Will Europeans turn to the United Kingdom to replace American whiskey with Scotch? Perhaps. But the UK is no longer in the EU anyway. France, Germany, and others seem unlikely to invest in their own domestic distilling for near-term gain. Instead, Europeans will be left to pay a heftier price for whiskey or go without. Likewise, Trump’s proposed countermeasures on European champagne put US consumers in an analogous position. The US domestic wine market may be robust, but champagne can only be made in Champagne, France.
As the potential domestic impact ratchets up, US allies will likely discover that retaliation leaves a bitter aftertaste, especially for the Transatlantic relationship. This is the forcing function of tariffs that the Trump administration is hoping to see.
US presidents who came before Trump like William McKinley and Herbert Hoover found that the best tariff intentions do not always turn out as planned, instead bringing domestic price increases and economic downturns. In the current interconnected world where supply chains are truly global, the historical experience may not directly apply. Still, there is a real risk that it might. The question is, when the music stops, who is left with a seat and a glass of bubbly?
Lindsay Newman is a geopolitical risk expert and columnist for GZERO.