The competition among global political and economic elites to attend U.S. President Donald Trump’s speech at the World Economic Forum in Davos, Switzerland, was a symbol of the history-making at stake. After a week in which the Trump administration threatened Europe with the seizure of Greenland, the conference was held captive to the Trump administration’s direct challenge to the terms of the trans-Atlantic alliance and the general liberal ideology that informs the annual Davos meeting.
What posture did U.S. officials take toward Europe at Davos? What options for resisting U.S. coercion does Europe have? Were corporate elites expressing as much concern at Davos as policymakers?
Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.
Cameron Abadi: Trump was joined at Davos by major figures of his administration, all of whom were seemingly trying to channel his impulses into a consistent policy line. That mostly seemed to come across as a kind of generalized contempt expressed toward Europe in public at every opportunity. How would you characterize this posture and the strategy informing it?
Adam Tooze: Condescension, I think, is a key element of it. Hostility and condescension. I mean, we’ve talked about it on the show before. My general view is that the more ideological elements of MAGA are much more preoccupied with Europe than they are with China or Russia or anywhere else in the world. They’re not universal, so they don’t regard those places as at all relevant, really, to the American political struggle, which is their top priority. But quite reasonably, they regard Europe as an extension of the PMC, professional managerial class, liberalism that they despise in the United States. And as you were saying, the first time around—and if you look at the climate policy, which I’m trying to finish this book about, it’s very clear—in 2017, as Trump took office, America’s climate-concerned liberal corporate elites basically rallied around the Paris Agreement of 2015 and Davos and continued on in defiance of the president’s effort to shape a national MAGA anti-climate strategy.
And so they’re not wrong to think that, you know, if they want to wage a comprehensive political and cultural struggle in the United States, Europe is a relevant battlefield. And the precise logic of it is a little more complicated, especially when it comes to promoting far-right parties in Europe, who, over Greenland, if you watch the sort of C-SPAN equivalent of the European Parliament, you know, centrist parties all go up to say, “No, we will not ratify the trade agreement with the United States.” And then slowly, slowly, the representatives of the far-right parties realize, “Oh God, we’re going to find ourselves isolated and unpatriotic unless we join the opposition to Trump.” And many of them do. [Italian Prime Minister Giorgia] Meloni has been struggling with this in Italy, how to position herself. So I think that element of the MAGA program, of extending the political and cultural war to Europe, is a key element.
But again, the National Security Strategy did not focus squarely on Greenland in the way that we have been forced to do in the last couple of months. It didn’t say jeopardize relations with Europe for the sake of Greenland, right? Something’s happened there where the president has got to be in his bonnet, and as you’re saying, the single rule of membership in the Trump government seems to be just complete loyalty to whatever nonsense the president says, like whatever he said goes.
CA: Canadian Prime Minister Mark Carney very bracingly argued the old liberal world order was undergoing “rupture.” But as great powers take a realist posture in the ways he described, what exactly did he suggest middle powers should be doing? Was he arguing that they should continue pursuing liberalism with one another, just from some less naive vantage point?
AT: What he’s aiming for, for me, is not liberalism in general, but liberalism with whom you can do liberalism. So pick your partners. And obviously, the Europeans will be one sort of partner that you might be able to do that with, or the Japanese, for instance, or the Australians, Latin America. But Carney demonstratively went to Beijing and did a deal with them. And if you read the speech, what he says is, right now, the priority for middle powers should not be the kind of deep, values-based arrangements. So this is what he’s giving up, right? The exclusive focus on deep, value-based arrangements is what we cannot any longer assume is going to be the norm. So in the absence of that, what we have to be willing to do is much broader, thinner deals with countries with whom one doesn’t necessarily have values agreement on the issues, however, on which one can agree. And that’s what Carney’s recent trip to China was supposed to demonstrate. And the Brits are following up—[Prime Minister] Keir Starmer, who wasn’t at Davos, will be going to Beijing by all accounts, I think pursuing something quite similar.
Implicitly, of course, that also leaves room for dealing with a MAGA in the United States, which ought to be treated by rights as a pariah, but obviously if you’re Canada, you can’t. So what do you do? You do the kind of arrangements that you can make work with the United States. But let’s stop pretending, certainly in its current incarnation—well, I think in general, one would have to say—that American democracy is a reliable partner for any kind of sophisticated modern international deal.
So that’s what I think the import of Carney’s message is. It is that the assumption of universality, of convergence, of deep convergence is dead. So instead, what we do is we look around realistically at those with whom one can reach that kind of agreement and with others move to a more minimal kind of conception. But potentially much more embracing, because you’re not going to wait around, as the Biden administration would want, for Canada to agree to a policy with the United States on China. If that’s the neuralgic issue of the current moment, that’s done. The effort by the Biden administration early on in 2021 to rally all of the democracies against China, that America no longer serves as an effective anchor for that kind of alliance building.
CA: What practical options does Europe have for resisting U.S. coercion? Europe has developed a specific anti-coercion instrument; is that a realistic option?
AT: Yeah, I mean, we’re recording on Thursday night and the Europeans are meeting in an emergency session this evening. And it’s quite clear that if they hadn’t gotten the deal that they seem to have arrived at, there was every chance that they would be discussing the triggering of the anti-coercion mechanisms against the U.S. And the problem with Trump is you never know what to take seriously. He hadn’t, after all, actually imposed the tariffs or sent troops. He just talked about it in a completely irresponsible way.
But I think, yes: The anti-coercion instrument is basically targeted tariffs in the first instance, and then much more aggressively, coercive sanctions against American corporate interests in Europe. So that would be basically the removal of the license to operate American firms in Europe, which would be drastic. And, as [French President Emmanuel] Macron said in his speech, it would be crazy, I think that was his word, if this instrument which was developed by Europe with China and Russia in mind was in fact to be first used against the U.S. Beyond that, I mean the Europeans put troops in Greenland, obviously in a kind of like trigger, like a trip-wire kind of way. Of course, the Europeans don’t have much to back up the trip wire with, but the idea was to make it unthinkable for the Americans to use force because they would be shooting at fellow NATO members potentially. So that couldn’t happen. And then down the line, there’s all sorts of other kind of talk about other instruments Europe might use, because the long-standing economic connection and interdependence has of course created vast arrays of assets that could be used by both sides potentially. Europe is a huge foreign investor in the United States, and the Europeans buy very large quantities of more liquid assets, financial assets as well from America, which is how America finances its chronic trade deficits with Europe. And all of those give Europe a degree of leverage.
CA: There was a lot of talk this week about a Deutsche Bank report that described the retaliatory option of Europe selling its holdings of U.S. debt in response to coercion from the United States over Greenland. How seriously should that be taken as a potential measure?
AT: I mean, I have to say I didn’t focus mainly on European events this week, but I was at one meeting this afternoon, this is Thursday afternoon, a very high-level meeting, including several heads of government and foreign ministers and two of the policy banks, and this issue came up and no one wanted to talk about it. So it was floated by the chair and just no one wants to talk about it. I mean, there are three things to say, I think. First of all, unlike China, the vast majority of European holdings are not any kind of centralized reserve. So, the absurdity of the European negotiations with Trump over LNG purchases, there’s nothing there, right? There’s no European agency which controls these and could turn them into a lever of power, unlike in China, where we think even those which aren’t held by the official agencies could be instrumentalized and are probably currently being instrumentalized to hide how large China’s holdings are because it’s unpopular in China for the central government, SAFE, the asset management fund, to actually hold too many American Treasurys. And they also want to obscure how big their surplus is. So A, that doesn’t exist. B, the one instance where a so-called bear raid on U.S. Treasurys was actually unleashed is in 2007, ’08 by [Russian President Vladimir] Putin, by the Russians after the Munich Security Conference into 2008 running up to the crisis over Georgia with the Americans seemingly on the ropes because of the financial crisis. Putin, by all accounts, and this is authenticated from several different sources, attempted to persuade the Chinese to join him in selling Treasurys. The Russians did run down a large part of their foreign exchange reserve held in Treasurys, and it made zero impact because at the time the banking crisis was happening and people run into public debt because it’s safe, and so there were people snapping up the Treasurys that the Russians were selling. So it didn’t work.
Imagine if it did work. In the extraordinarily unlikely event that Europe would go there, it would be, you know, costly, expensive, and dangerous. And the Americans have ways of coping with it, because during the 2020 financial crisis around COVID, which was a Treasury-centered crisis, not a bank-centered crisis, what the Fed simply does is step in and buy the Treasurys that are being sold by reserve managers. And there’s no question at all that if the Trump administration was confronted by a concerted European effort, it would just buy them. So it would be dangerous. Very alarming.
CA: Obviously, policymakers were considering far-reaching contingency plans this week. But what do the corporate elites and the private-sector representatives in attendance say about the rupture of globalization and the trans-Atlantic relationship? Are they as concerned as the policymakers we’ve been talking about?
AT: It was a very ambiguous experience. I did not hear either on or off the record a single senior American business leader distance themselves from the aggression of the Greenland policy and the insanity of the Trump speech. Remember, we met days after the mad Trump letter to the Norwegian prime minister. I mean, truly, you know, a demonstration of a kind of infantilism. And yet no one would touch it. I at no point heard anyone in the American corporate world willing to distance themselves from what was going on.
So on the one hand, you have this huge convening power, which matters. But on the other hand, it’s like you’re pushing on a piece of string. Or “paper tiger” is perhaps too strong a word, but nevertheless, at least publicly, it doesn’t have much weight. My sense is that it did matter behind the scenes. You couldn’t very well deny the seriousness. And for all the obstreperousness and cantankerousness and protesting of the Trump people, after all, they chose to come, unlike the Biden administration.
CA: Where does all of this leave Davos and the World Economic Forum? The Trump administration was de facto announcing the end of this era of globalization. Were attendees at Davos left reckoning with what role the conference still has to play?
AT: Well, I mean, this is part of the paradox, right? I think in living memory, there may not have been a Davos conference that attracted more attention than this one. Because, you know, one way of reading it is that they backed away from crazy types of war over Greenland this week. And to reemphasize, no one other than the Americans is talking about the end of globalization in the way the Trump people are. Really, that’s just an American conversation. No one else is, it’s nonsense. So, I mean, I’ve been doing these long enough to be friendly with people whose job it is to make these things happen. Many of them are in total shell shock, because it’s been brutal, dealing with the discourteousness and just horror of the Trump team. Not everyone, there’s some notable exceptions, no need to name names, but it’s the case. But in general, it has been brutish and not short.
But I think one thing is very clear, which is that having it run by even the most powerful, comprehensive agency of American finance creates conflicts of interest which are really difficult to handle. And [European Central Bank President] Christine Lagarde is the person most widely thought to be in line to succeed as leader of Davos. And in many ways, she would make a very obvious kind of figure, manager of the process. She obviously has strong views about the way in which these sorts of conversations should be conducted. It’s very clear, I think, that a kind of merger of the organization with American capital doesn’t work. I think it’s exposed to some risks they’re probably not at all comfortable with politically. And it doesn’t work in terms of the logic of convening. And there were quite a lot of Swiss people talking to me and saying none of this would have happened in the old years of Klaus Schwab. This would never have been handed over. It would have been more autonomous. I’m not going to indulge in that kind of nostalgia. But I think structurally it’s pretty obvious why even the Americans might want not one of them to have to actually make some of the tough decisions that are necessary. So it’s been fascinating to watch as a learning process.
