The ongoing US government shutdown is casting a long shadow over Europe, with leading economist Ulrike Malmendier warning of potential retaliatory tariffs as a possible tactic for President Donald Trump. Speaking to Der Spiegel, Malmendier, a professor at UC Berkeley and member of the German government’s expert council for economic affairs, suggested the crisis could ironically provide Trump with a renewed impetus for protectionist measures.
While the shutdown might initially curb Trump’s ability to escalate trade tensions, it simultaneously limits his resources for compromise with Democrats. Malmendier posited that imposing new tariffs could represent a readily available revenue-generating strategy for the administration. This sentiment is further fueled by Trump’s recent threats against China, which signals that trade wars remain a distinct possibility. The uncertainty surrounding US trade policy continues to force companies worldwide to constantly recalibrate their economic projections, particularly those operating within the American market.
Malmendier’s critique extends beyond merely anticipating US trade actions. She sharply criticized Europe’s perceived inertia, urging policymakers to abandon protracted planning cycles and embrace decisive action. In a recent conversation with German Chancellor Friedrich Merz, she underscored that Europe has been granted an unexpected advantage: a position of legal certainty and stability in an increasingly volatile global landscape.
The economist’s prescription involves aggressively completing the European single market, significantly boosting funding for both startup ventures and established businesses and streamlining immigration processes to attract talent. She acknowledged the challenging nature of implementing such sweeping changes, emphasizing that the time for lengthy strategic documents is over. Instead, she called for a concrete timeline outlining the execution of five crucial measures, with a system for tracking progress and prioritizing implementation across willing member states.
Malmendier warned that inaction risks exacerbating Europe’s vulnerability to the fallout from the US crisis and shifting geopolitical realities, stressing that proactive reforms are essential to ensure Europe’s economic resilience and continued prosperity.