Today, let’s talk about Trump 2.0.
Last month, the U.S. elections concluded, and Trump not only won the election but did so with a very clear advantage. Many people were worried about Trump 2.0, and now it has become a reality. Whether in the U.S. or other parts of the world, Trump’s return has sparked significant reactions, but the focus varies. Domestically, the main concern is the impact of Trump’s second term on the U.S. political ecosystem, including the division and conflict of social values, as well as the political revenge that might unfold under Trump’s rule. Globally, people are mainly focused on the next steps in U.S. economic and trade policies, especially tariffs, as well as the potential impact of Trump’s return on U.S.-China relations, the Russia-Ukraine conflict, and the situation in the Middle East. Overall, there is a general consensus that Trump’s return is a huge variable that will bring many changes to the world. But what exactly will these changes look like? What exactly will Trump 2.0 bring to the world? The answers to these questions are still speculative at this stage. Today, in this lesson, we will look at some insights from major think tanks around the world regarding Trump’s victory and try to understand these changes and predict the next direction.
First, let’s look at the first question, which is the one we care most about:
1. What impact will Trump 2.0 have on U.S.-China relations?
There has been considerable analysis on this topic. Many think tank reports suggest that China has reacted with indifference to Trump’s return, as after Trump’s first term and four years under Biden, China has seen clearly that regardless of who holds the U.S. presidency, the U.S. policy toward China will continue on a tough path. However, the extent of the pressure Trump 2.0 will exert on China varies among different think tanks.
I have here a report from the Russian Valdai International Debate Club, released on November 19, titled “Trump’s China Policy: Will He Step into the Same River Twice?”. The report argues that there will be no significant difference in Trump’s policy toward China between Trump 1.0 and Trump 2.0, and the only issue is how the confrontation between China and the U.S. will unfold.
The report states that understanding Trump’s China policy is key to understanding his approach, which is rooted in his view of China as a country that benefits from the U.S. open economic system. For Trump, China is the biggest threat to U.S. economic prosperity and technological superiority. Therefore, the report suggests that during his second term, the U.S. will likely continue the tariff war and further decouple from China. The U.S. is expected to impose a 60% tariff on Chinese goods and remove China’s Permanent Normal Trade Relations status.
Can these economic and tariff issues between the U.S. and China be resolved through negotiation? The report believes that negotiations will be even more difficult than before, with Trump using China’s pain points to apply pressure in order to achieve his goals. On the critical issue of Taiwan, Trump is expected to further strengthen U.S. support for Taiwan. The report points out that during his previous term, the U.S. approved over $18 billion in arms sales to Taiwan, a higher amount than any previous administration, and this trend is unlikely to change.
Overall, the report emphasizes that Trump 2.0 will significantly impact China, with many experts and think tanks holding this view. Recently, some institutions have even downgraded their economic forecasts for China. However, there are other think tanks offering different perspectives. For example, on November 14, the European and Global Economic Governance Laboratory released a report titled “China’s View of Trump: Cold and Cautious”. This report acknowledges the significant impact of Trump’s return on U.S.-China economic and trade relations but also suggests that there are opportunities for China under Trump’s “transactional” foreign policy style. I’ve introduced this report in Global Think Tank Report Interpretation Season 5, Issue 51. Here, I’ll present another report with a similar viewpoint, though it addresses certain issues more directly.
This report is from the German Social Democratic Party’s main think tank, the Friedrich-Ebert Foundation, and was released on November 22, titled “Ready to Talk Business”. The title alone is quite intriguing. The report suggests that Asian countries, unlike those in Europe and the Middle East, generally have no illusions about Trump’s return and remain quite calm. China’s response is no different. On one hand, China fully understands that engaging in intense competition with China has become a bipartisan consensus in the U.S., so Trump’s return merely means a continuation of the confrontational approach, leading to no illusions on China’s part. On the other hand, China is making various preparations, as a long-anticipated trade conflict may be reignited and escalate into a full-scale trade war.
The basis for this judgment, according to the report, is Trump’s actions during his first term, as well as the composition of his new team. As we know, the makeup of a team often reflects the direction of future policies. This time, Trump has nominated a team of strong China hawks. For instance, Marco Rubio, nominated for Secretary of State, is a U.S. Senator known for his strong anti-China stance and is the sponsor of several anti-China bills. Another key figure is Mike Wals, nominated for National Security Advisor, along with Peter Haigse, nominated for Defense Secretary, both of whom share similar views. The report concludes that, based on the composition of Trump’s team, Trump 2.0’s policy toward China will likely be even tougher than during his first term.
However, the report also presents another possibility: Trump may seek to negotiate with China, much like the 2020 U.S.-China Phase One agreement, where China increased imports from the U.S. in exchange for the U.S. lifting some tariffs. The report notes that Trump has hinted a few times that he would be willing to make some compromises if it aligns with U.S. interests. So, the “deal-making” tendency is quite strong, and there is a possibility that the worst-case scenario of a full trade war could be avoided.
Additionally, the report suggests that Trump’s return could bring China some additional advantages. The first is greater political influence, particularly over the Global South. This is because Trump’s second administration is expected to exit certain multilateral mechanisms, especially those related to climate change. The U.S.’s withdrawal would create a political vacuum, and China, which is already prepared both politically and materially, could fill this vacuum. More importantly, this shift would garner support from the Global South, as these countries urgently need support and assistance in energy transformation. The second advantage for China could be improved relations with some Western countries, especially Europe. The report provides an interesting perspective, saying that Europe, like some U.S. swing states, is a “swing power” in international politics, particularly between the U.S. and China. Trump’s return will have a huge impact on Europe, so the motivation for China and Europe to align will significantly increase.
In summary, Trump 2.0 presents serious challenges for China, especially in terms of tariffs and trade, but there may also be opportunities for China, and there is a possibility of some compromise between China and the U.S. However, this raises another question: if Trump plans to use high tariffs against China, can he really do so without facing significant costs to the U.S. economy? Some experts argue that such actions could harm the U.S. economy, so Trump’s tariff increases may not be feasible. Therefore, when evaluating the impact of Trump 2.0 on U.S.-China relations, we must consider another variable: the economic consequences of Trump’s policies. This is the subject of the second part of our discussion.
2. What economic consequences can we expect from Trump 2.0?
There has already been significant debate within the U.S. about the economic consequences of Trump 2.0. Supporters argue that Trump’s policies, such as substantial domestic tax cuts, high tariffs on foreign imports, and mass deportation of illegal immigrants, are excellent measures that could effectively boost the U.S. economy. Opponents, however, claim that these policies disregard basic economic principles and could lead to an economic crisis. As you can see, there are two extreme positions.
However, I have a report with a more neutral stance that may help us understand the economic consequences of Trump 2.0. The report, titled “How Will Trumponomics Work?”, was released by the Peterson Institute for International Economics on November 13. The report starts by pointing out that Trumponomics will neither create the prosperity supporters expect, nor cause the disaster that critics predict. So, what will the consequences be?
First, let’s look at the tariffs. The report suggests that Trump isn’t using high tariffs as leverage for negotiation with countries like China; he genuinely seeks high tariffs. The direct result will be an increase in U.S. tariff revenue, a decrease in foreign imports, and a reduction in the U.S. trade deficit. This is relatively easy to understand. However, the report warns that this will lead to two possible outcomes. In the first scenario, if China and Europe do not retaliate with their own tariffs, the U.S. will not escape costs. The report explains that the U.S. is currently at full employment, and when demand for foreign goods shifts to domestic goods, domestic products will become in short supply, pushing up prices, leading to inflation. The Federal Reserve will need to raise interest rates to address this, which could strengthen the dollar, making U.S. exports more expensive and less competitive—a situation Trump does not want.
In the second scenario,
if China and Europe retaliate with tariffs of their own, the U.S. economy could face even more negative consequences, as a prolonged trade war will raise prices and disrupt the global supply chain.
3. Impact of Trump 2.0 on Other Key Regions
In this section, the most discussed region among think tanks is Europe. In fact, many think tanks, when analyzing Trump 2.0 and China-US economic relations, also tend to analyze the impact on the European economy. They generally believe that the pressure on the European economy will be very high in the next phase, mainly because:
First, Europe is a key target for Trump. We all know that the U.S. has a huge trade deficit with Europe, which reached 158 billion euros in 2023, accounting for about 15% of the U.S.’s total trade deficit. Trump is particularly concerned about trade imbalances, so he is likely to take immediate action against Europe, including raising tariffs. Countries like Germany and the Netherlands, which are major exporters, will be the first to face the brunt of these actions.
Second, Europe will be affected by the China-US trade tensions. What does this mean? Think tanks believe that during the Trump 2.0 era, there are two possible scenarios for China-US trade friction: one is a high-intensity trade war, which would severely disrupt the entire international trade system (including the World Trade Organization), and of course, the European economy would be greatly impacted. The second scenario is a China-US compromise, similar to the phase-one deal Trump achieved during his first term, where China bought large amounts of U.S. goods in exchange for the U.S. lifting some tariffs. But is this scenario better for Europe? Not really. European goods and U.S. goods have high similarities in the Chinese market, and they are in competition with each other. A typical example is Boeing from the U.S. and Airbus from Europe. If China increases imports of U.S. goods, it means that Europe’s market share in China will be severely squeezed. So, regardless of the scenario, it’s not good for Europe.
Third, Trump will further pressure Europe to “decouple” from China. Think tanks believe that compared to the Biden administration, Trump’s style will be more straightforward and aggressive. Trump’s administration will exert more direct pressure, possibly even threatening secondary sanctions, to force Europe to decouple from Chinese technology. For top European tech companies like ASML, which produces advanced photolithography machines, Trump may even force them to relocate production to the U.S. Based on Trump’s characteristics, he is likely to mix these tactics against Europe to maximize his benefits, which will make things very uncomfortable for Europe.
Of course, economic pressure is not the only concern for Europe. A significant source of uncertainty brought by Trump 2.0 is in the geopolitical sphere, especially in relation to Ukraine and NATO. European think tanks have discussed this issue intensively. Here is a representative report from the Italian Institute for International Affairs (IAI) released on November 20, titled Trump, Ukraine, and NATO: Europe’s Two Crossroads. The report argues that, from a geopolitical perspective, Trump 2.0’s biggest pressure on Europe comes from Ukraine and NATO.
First, regarding Ukraine, we know that Trump claimed he could end the Russia-Ukraine conflict within 24 hours and has always opposed U.S. aid to Ukraine. Therefore, people generally believe that he would use halting aid as leverage to force Ukraine to stop resisting. What would a ceasefire look like? The report provides further explanation, citing that Trump’s vice president, Mike Pence, has already clearly stated that Russia would retain all Ukrainian territories it occupies, and the current front lines would serve as the ceasefire line, with a demilitarized zone established (this is very similar to the situation on the Korean Peninsula). But unlike the Korean Peninsula, Ukraine would have to become a neutral country, ensuring it does not join NATO. This outcome shows significant concessions to Russia from the U.S.
But the question is, what would Europe do in this situation? The report states that while Ukraine may not be of significant importance to the U.S., it is very important to Europe. Trump’s decision would place Europe at a crossroads: should it stand by passively, watching the U.S. and Russia make deals, sacrificing Ukraine and its own geopolitical interests, or should it intervene decisively in the negotiations? If Europe does intervene, where would it focus its efforts, and what would the outcome be? This is Europe’s first geopolitical pressure point.
The second pressure point mentioned in the report is NATO. Trump has openly expressed disdain for NATO in the past. Some Europeans are worried that Trump 2.0 might even withdraw from NATO. However, the report argues that this is unlikely for two reasons: First, Trump has no strong incentive to abandon NATO; second, even if he did want to leave NATO, domestic constraints would prevent it, as U.S. withdrawal from NATO requires a two-thirds majority in the Senate, and currently, Trump’s Republican Party has only a slim majority.
The real pressure the U.S. will exert on Europe regarding NATO is through burden-sharing. On the one hand, the U.S. military will further withdraw from Europe, and on the other hand, Europe will be forced to take on more defense responsibilities, particularly by increasing military spending. Currently, 23 out of NATO’s 32 member countries meet the requirement of spending 2% of GDP on defense, and those countries that do not meet this threshold will be the primary targets of Trump’s pressure. But raising defense spending to 2% might not be enough. The report suggests that, in response to the Russia-Ukraine conflict, some European countries, like Poland (which will raise defense spending to 4.7% of GDP by 2025) and the U.K. (which will raise it to 2.5%), have already significantly increased their defense budgets. Trump could potentially push NATO members to raise the spending threshold above 2%, thereby increasing Europe’s defense burden.
The report provides a clear explanation of the geopolitical pressures Trump 2.0 would bring to Europe, and I won’t elaborate further. Now, let’s turn to another key geopolitical conflict region — the Middle East.
Currently, risks in the Middle East remain high. The Gaza conflict is ongoing, and Israel and Iran have come close to large-scale conflict twice. In this context, what will Trump 2.0 bring to the region? The U.S. Middle East Institute released a report on November 12, titled Special Briefing: The Middle East’s Response to Donald Trump’s Re-election. This report focuses on Israel, Palestine, and Iran — the main parties in the current conflict.
Regarding Israel, the report states that most of Israel’s centrist and right-wing voters support Trump because they believe he will unreservedly support Israel, enabling Netanyahu’s government to continue its military actions in Gaza. However, Israel’s left-wing is concerned that Trump 2.0 will allow Israel’s hardline policies to dominate, thus eliminating any prospects for a two-state solution between Israel and Palestine.
On the Palestinian side, while Palestinian leader Abbas sent a congratulatory message to Trump, the general sentiment among Palestinians is one of indifference mixed with deep fear. They believe that Trump will continue to support Israel unconditionally and will not pressure Netanyahu as the Biden administration has done. As a result, Israel’s hardline policies will go unchallenged, and the situation for Palestinians in Gaza and the West Bank will worsen.
So, you can see that both Israel’s right and left wings, as well as the Palestinians, have similar expectations of Trump. In other words, the Gaza conflict will continue, and Israel will further confront Hamas. However, the real concern for Middle Eastern countries is not the Gaza conflict itself, but the potential for an Israel-Iran confrontation, which is the true power struggle in the region.
Speaking of Iran, you may remember that during Trump’s first term, he pursued a “maximum pressure” campaign against Iran, withdrew from the Iran nuclear deal, and even ordered the killing of General Qassem Soleimani, head of the Iranian Revolutionary Guard’s Quds Force. Many expect Trump 2.0 to continue applying pressure on Iran, with some predicting that the U.S. might even collaborate with Israel to overthrow the Iranian government. However, the report suggests that Iran does not see things this way. Why? First, Trump’s re-election gives him more political capital to negotiate with Iran without worrying about domestic hardliners. Second, during Trump’s first term, he presented Iran with a harsh 12-point list of demands, essentially demanding Iran’s total surrender. But the architect behind this list was not Trump but his then-Secretary of State, Mike Pompeo. Iran has noticed that Pompeo and other Iran hardliners were not included in Trump’s second-term cabinet, so they believe there is still room for diplomacy with the U.S. The report quotes an adviser to Iran’s Supreme Leader Khamenei, who said, “Trump’s actions during his first term were not wise, but he may have gained more experience and might pursue a more constructive approach toward Iran.” This rhetoric is quite interesting.
When we put all of these factors together, we can conclude that the Middle East will remain in a state of chaos and high risk during Trump 2.0, but the likelihood of extreme situations, such as regional wars, remains relatively low.
At this point, you may have noticed that expectations for Trump 2.0 follow this general line of thinking: On the one hand, people do not harbor unrealistic hopes, knowing that Trump 2.0 will bring significant shocks, but on the other hand, they do not expect extreme risks to materialize. This judgment is generally sound, but it is based on one fundamental assumption: that Trump has not changed, that he is still the same Trump as four years ago. Is this assumption valid? I recall a student commented that the past Trump was a businessman, but perhaps he is evolving, moving toward becoming a politician. This possibility does exist, but it cannot be confirmed at this point. If this variable is confirmed, it could change the entire pattern. Let’s continue to observe.
