Frustration is mounting in Brussels and Beijing over Donald Trump’s trade policy. The former U.S. president’s tariffs have caught the elite bureaucracies off guard and exposed their own protectionist instincts. In this global power play, the United States holds the stronger cards.

On Friday, Trump unveiled his first official trade agreement since announcing a new wave of tariffs on April 2. The United Kingdom was the first to sign on, signaling a potential shift in the global trade order.

One key bargaining chip for the U.S. is ethanol: a commodity essential to industrial production and chemical manufacturing, where America commands a 52% share of the global market. In trade talks, the U.S. is leveraging its ethanol dominance as a counterweight to Chinese control over rare earth elements and other critical raw materials.

With success—Britain agreed to open its domestic market to American agricultural goods and accept a general baseline tariff of 10% on U.S. imports, all in order to maintain access to American ethanol. This could further deepen Britain’s trade deficit, which already stands at $12 billion annually—a tactical win for Trump.

India Moves First
In return, the U.S. has agreed to remove tariffs on British steel and aluminum imports—another strategic step toward American reindustrialization. As nations compete for market share and domestic economic advantage, the fight now comes down to every fraction of a margin—and it’s a brutal one.

India was quick to recognize this shift. During recent negotiations, President Modi signaled willingness to eliminate reciprocal tariffs on auto parts, pharmaceuticals, and steel—a clear indication that the emerging economic superpower seeks closer partnership with the United States.

Is New Delhi realigning with Washington at the expense of deeper integration with the BRICS bloc? China’s dominant position within BRICS has long been a source of discomfort in India. A tighter U.S.-India bond could cement New Delhi’s role as a “swing state” between competing spheres of influence. In this case too, Washington’s hardline approach appears to be yielding improved trade conditions for the American economy.

EU Threatens Retaliation
Brussels, by contrast, shows little readiness to compromise. On Thursday, the European Commission published a list of potential retaliatory tariffs, to be enacted if negotiations fail. If implemented, the EU would collect an additional €95 billion annually from tariffs on U.S. goods. Notably, 75% of these revenues would go directly to the European Commission, which currently finances around 12% of its budget through customs duties.

This perverse incentive structure helps explain why Brussels is no champion of free trade. Whether Trump can crack this nut remains to be seen. The U.S. benefits from the Eurozone’s ongoing deindustrialization and recession. While Washington champions economic freedom and energy independence, Brussels drowns in red tape.

Central bank digital currencies (CBDCs), creeping dirigisme, and micromanaged market interventions are choking European business, making the continent increasingly unattractive to investors. Spain’s new rule—requiring state approval for any cash withdrawal over €3,000—signals how serious Europe is about building “Fortress Europe.”

Trump has made it clear that the era of hidden Euro-protectionism is over. The U.S. withdrawal from regulatory policies tied to the Green Deal marks a turning point: American firms will increasingly harness traditional energy resources, while European industry buckles under climate regulations and carbon-tax burdens.

The return of U.S. dollar pricing power, via the Secured Overnight Financing Rate (SOFR), will soon hit European credit markets. The age of zero-interest, dollar-based loans for ideological pet projects is nearing its end. From now on, real collateral—like U.S. Treasuries—will be required to access dollar liquidity. Oil, energy, and gold will dictate terms—resources Europe has little or none of. Even after years of green subsidies (with Spain as a prime example), the EU still imports 60% of its energy. If the dollar appreciates, Europe will need to print more euros to buy energy—a vicious cycle.

China’s Bubble Is Bursting
And then there’s China. For years, Beijing has battled the collapse of its property sector, peaking with Evergrande’s default—a crisis that remains unresolved. Falling real estate prices, combined with demographic decline, are driving a deflationary spiral now exacerbated by Trump’s tariffs. China had attempted to offset economic contraction by aggressively expanding exports during the crisis years.

Trump pierced this artificial bubble on April 2, unleashing another deflationary genie. Chinese producer prices fell 2.7% in April, a foreboding signal. China is choking on its own overproduction, factories are shuttering, and unemployment is rising. This is no ordinary trade war—it’s a death blow to the myth of Chinese dominance in global exports. A legitimacy crisis looms for the Communist Party, which had long relied on the promise of eternal growth in its Five-Year Plans.

Monetary fragility is also becoming evident. While the U.S. Federal Reserve maintains high rates, the People’s Bank of China is under pressure to cut rates and inject liquidity. The yuan must devalue. Credit must flow—at all costs—to stabilize the economy.

That Beijing made the first move in negotiations this week, as Reuters reported, is more than symbolic. The pressure cooker is heating up, and China is trying to break free of America’s grip. But it would be a mistake to assume Europe will come to the rescue by flooding its markets with Chinese goods.

China’s trading partners—including India, Vietnam, and Japan—sense Beijing’s vulnerability and are now pursuing bilateral deals with the U.S. If Trump succeeds in weakening these ties, the entire BRICS project, built on the illusion of Chinese economic monolith, could begin to crumble.

A New Global Order Emerging?
The United States has shaken the global order. Washington’s attempt to escape the burdens of global reserve currency status—financing the world at the expense of its own industry—is understandable. But the transition brings volatility and steep costs for all parties involved. If the heavily indebted U.S. can stay the course and delay its own debt reckoning, Trump may well succeed in rebalancing global power in America’s favor.

The key question is: where will structural cracks evolve into full-blown crises? Which nations are prepared to endure domestic pain to adapt to new economic realities? True reform involves liberalization, lower fiscal burdens, and dismantling overgrown welfare systems—especially in countries like Germany, where subsidies have reached unsustainable levels. A catharsis is coming. It is needed. It was inevitable.

Donald Trump didn’t cause the crisis. He merely pierced the illusion.

_______________

Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.