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In recent weeks, the American economy has had to deal with several warning indicators. Preliminary estimates show a 0.3% decline in GDP for the first quarter of 2025 compared to the previous one. The S&P 500, the main stock index, had surpassed 6,000 points in the first half of February, right after the new administration took office; by the end of April – just after the symbolic “first hundred days” – it was just above 5,500. During the same period, the value of the dollar dropped from about 96 euro cents to just over 88. For those in the Eurozone who invested in the United States, then, these have been difficult weeks.

BEYOND GLOBALIZATION: THE WEST IN SEARCH OF A NEW BALANCE

As was to be expected – and, according to Trump, widely predicted – the most significant financial shock occurred between April 2 and 4, right after the introduction of the so-called “reciprocal” tariffs and, more broadly, the marked shift in international economic policy driven by the tycoon. It was dubbed “Liberation Day“, referring to the old world in which globalization was seen as enriching other nations – namely China, Canada, and Mexico – while impoverishing the U.S.

Clearly, something in the previous status quo was not working. Undoubtedly, some countries took advantage of the West’s attachment to freedom, human rights, and even environmental protection. Globalization has “compressed” history, enabling gigantic leaps in very short timeframes: in “emerging markets”, everything may have happened in thirty or forty years at most, often driven by strong external forces.

However, Trump’s and the MAGA movement’s vision has deep roots – more political than economic – and aims to rewrite the world order, in which trade is only one pillar (not the only one). Despite the “existential crisis” in transatlantic relations, Europe has so far – rightly – adopted a different approach. The Italian government has helped shape the continental strategy: in recent weeks, Giorgia Meloni has played a leading role in several major diplomatic events, successfully building that “bridge” between two worlds – now seemingly very distant – that had rightly been hoped for.

FROM CRISES TO RATINGS: THE SILENT LESSON OF THE MARKETS

Then there’s the financial front: in democracies, markets often manage to bring to reason those who wield power recklessly – just as they did with Liz Truss in 2022. Some commentators have noted that the same could be said of Trump, although this “correction” in the price of financial assets has sparked relatively limited political uproar. Upon closer inspection, the opposite is also true: markets reward nations with stable governments that act with prudence and foresight. This is evidenced by the recent improvements in credit rating agencies’ assessments of Italian debt, after years in which – starting from the sovereign debt crisis – reckless fiscal policies had led to an unfair underestimation of Italy’s creditworthiness.

FROM AMERICA FIRST TO A GLOBAL TREND: THE RETURN OF PROTECTIONISM

So, in the coming weeks, what will the American presidency do? Let’s put things in a slightly more historical perspective: yes, Trump was – both during the campaign and in his first hundred days – a staunch protectionist, at least on paper. He aimed both to devalue the dollar to boost exports and reduce the trade deficit, and to ease monetary policy more rapidly, in order to refinance the massive stock of public debt at favorable rates. But this means he acted -coherently – to bring back to the U.S. those capital flows that, in recent years, had become outward-bound foreign direct investments, especially toward emerging markets.

However, this is neither new nor unique. Many advanced countries have taken a similar approach, including the United States under previous administrations: Biden signed the Inflation Reduction Act and the CHIPS and Science Act; even earlier, George W. Bush and Obama had adopted a fairly tough stance on tariffs and the clauses of trade agreements, at least for certain products (e.g., steel and aluminum) and in sectors considered strategic for national security.

And Europe? According to Mario Draghi, it effectively “imposed tariffs on itself” by unleashing a flood of regulations aimed at creating indirect, non-tariff barriers – regulations that today partly explain the region’s weak, stagnant growth.

DEFENDING GLOBALIZATION, WITHOUT NAIVETY

From these first hundred days, we have ultimately learned that reducing the international economy to a showdown between mercantilists and globalists benefits no one – least of all the market itself. A divided West is a gift to the BRICS, with their ambition to create a monetary system alternative to the one based on the dollar (and the euro, and the yen). The international financial system is already polycentric: if the ruble and the yuan don’t play a major role, it is certainly not due to some “plutocratic conspiracy” orchestrated by “imperialist democracies,” but rather because of the grave violations of liberal values – humanitarian, social, and economic – committed daily by autocracies, above all Russia.

The EU has wisely refrained from pushing for “counter-tariffs” and instead appears to be moving toward a future with higher capital intensity and partial reindustrialization. The driving force should be investments in defense, which express the concept of “security” in its various forms: military, energy, cyber, and food security. If this effort were to fail, the loss would affect us all: at risk would be the great revolutionary movement – globalization based on capitalism – that, despite its undeniable flaws, has lifted hundreds of millions of people out of poverty worldwide. The West is right to be generous – but it must be careful not to be deceived by those who seek to destroy it.

Read A Global Call to Reverse Tariff Escalation>>>