Why Americans and Europeans Disagree About Globalization by Daniel Gros
Daniel Gros attributes diverging views on trade to differences in institutions, social resilience, and political narratives.
When Americans and Europeans talk about globalization, they are not talking only about trade volumes or manufacturing job losses, but also about institutions, social resilience, and political narratives. Keeping this broader picture in view is essential to guide responses to economic change in an unstable world.
BRUSSELS – Back in 1999, when the euro was introduced, the lack of flexibility in Europe’s labor market was widely expected to make responding to shocks more difficult. This fear was vindicated after the global financial crisis a decade later, when a real-estate boom went bust, leading to a sovereign-debt distress and prolonged downturns in the eurozone. The United States, by contrast, recovered from the 2008 crisis fairly rapidly. But the US has struggled far more than Europe to cope with another major economic shock: globalization and China’s emergence as an export powerhouse.
In many ways, globalization has presented a bigger challenge to Europe than to the US. Whereas US merchandise imports are almost exactly the same level as 25 years ago – 10-11% of GDP – the European Union’s imports have increased from about 11% of GDP to over 14%. The challenge presented by China’s rise, meanwhile, is roughly the same on both sides of the Atlantic. By 2023, both the EU and the US were running trade deficits with China of about $300 billion annually.
Despite these similarities, narratives about globalization differ sharply between the EU and the US. Though direct comparisons of opinion polls are imperfect, owing to variations in phrasing and methodology, the basic message is clear: Whereas a large majority of Europeans believe that they benefit from free trade, most Americans think other countries have reaped more benefits than they have.
US President Donald Trump has built his political career partly on these grievances – in particular, the narrative that free trade, especially with China, is responsible for the decline of US manufacturing and the struggles of displaced blue-collar workers in former industrial hubs. So, while EU leaders have remained broadly committed to trade openness – even European populists have not embraced protectionism – Trump is using the threat of tariffs to force countries into revised trade deals that are more favorable to the US.