My clients ask me when it will be safe to invest in the United States again, and I tell them that it will be when someone fixes the door, which for the financial market is trust, and it is shattered into pieces." These words come from the CEO of an international investment bank, very experienced, and perhaps that's why he didn't wake up with dark circles. Unlike his colleagues. It is April 4 at the Hotel Vila d'Este, on Lake Como (Italy), and neither the spring sun, nor the reflection of the water, nor the coolness of the mountains alleviate the overwhelming pessimism. The night has been brutal for the stock markets, but it's not a matter of numbers, but of certainties. "We were wrong about Trump: he is not a negotiator, I wish he were, he wants to leave a legacy." A legacy far from the global economy and the liberal order. From what has been understood in recent years as democratic capitalism. Despite everything, Europe appears as a refuge.
The European House Ambrosetti (TEHA) gathers experts in macroeconomics, monetary policy, and finance from around the world in Cernobbio. Also present are politicians who make decisions based on their forecasts, and the top industrialists from Italy and Central Europe who export their products. For two days, they explain and debate on what they believe will happen under the Chatham House rules, meaning the content can be shared but not the sources. What follows is a summary of 48 hours of presentations, responses, and comments. "If I think if Trump has a plan or if he's just crazy? I think he's crazy and he has a plan," says an executive from a financial institution who already experienced the first term of President MAGA. The plan is to shape the United States in his image and, with it, the planet. In this new paradigm, "the rule of law will be replaced by the law of the jungle," relationships will be defined through the coercion of the strongest, and multilateralism will be replaced by spheres of influence. The American influence will extend around a gigantic triangle between the Panama Canal and the Arctic, with Greenland and Canada included in it, no matter how the affected parties react. Regardless of what he achieves, Trump's geoeconomics is propelling three structural changes. The United States aims to become a production power without hegemony over global defense. This drives Europe to emerge as an economy based on domestic demand and pushes the Chinese regime to open up to private demand, especially due to its business and technological development. The rest is left to whatever could be done.
As the United States transitions to being the world's factory, which is currently Asia, and still maintains its economic, monetary, and technological primacy, it may be part of the president's desires, but it poses several problems. The main issue is that the pieces do not fit. Trump has imposed a 46% tariff on Vietnam, but its workforce is five times cheaper than the American one. No tariff can cover that. Additionally, it is true that the United States has a trade deficit in goods with much of the world, not in services. When both factors are considered, concerning Europe, the imbalance is reduced by half. American industrial workers have become poorer, but it is a huge lie that the rest of the world has plundered them. The countries that have exported their products have generated a trade surplus and reinvested it in the United States. The resulting strength of the dollar has allowed it to finance its fiscal deficits and distance itself as the leading economic and technological power. This is what is under review. It questions everything that intertwines the world order around the US dollar and the belief that overall prosperity would make war more difficult.
"The problem Trump faces is that China was ready for this move. They have been preparing for years. It's like playing a card game and showing your hand. That's what Xi did with the tariffs. If you put a 34% tariff on me, then I'll put one on you, and investors have fled. It must be understood that we need to prepare for four years of Trump and eight of Vance, anyone who doesn't see it that way doesn't understand. If it doesn't happen, even better. But the Chinese have certainly seen it, and to start with, they didn't give him TikTok, which is what he wants for his propaganda."
The role of the vice president only comes up in conversations among analysts from the United States. He is the other face of the MAGA revolution, the political aspect, as influential as the economic one. "Vance's insults to Europeans at the Munich Security Conference and the scolding of Zelenski are the same scene." Vance is the ideological cement, the one who opposes diversity goals, minority rights, migrants, foreign governments, or supports white supremacy. He claims that the Detroit motor worker Trump showcased in his press conference on tariffs is a victim of globalization who can have a future.
The president will not give up tariffs because they are "his Swiss army knife." According to his vision, they will reindustrialize the country, rejuvenate the economy, increase income, but above all, they are a powerful narrative that makes his voters feel protected. And that is unbeatable. Beyond the doctrinal program, what is truly distressing for many at Cernobbio is how to implement it through "organized witch hunts." Fear is the message. Attendees with interests in the United States demand deep off the record discussions. In his theory of the narrow corridor, Nobel laureate in Economics Daron Acemoglou explains that the State and civil society function in the free world by being separated by a "narrow corridor." The power of the State is represented as a Leviathan chained to provide security to its citizens without crossing that space and invading their individual rights. When it breaks free, socialism prevails. If it is the elite of society that conquers the State, it leads to a plutocracy. Martin Wolf, a star of the Financial Times and one of the speakers, states in his latest book that Trump has implemented "protopopulism," using populist techniques for plutocratic purposes. Once in power, the leap to tyranny in the name of the people is executed through repression. "You in Europe see it one way, but there you can have a law firm, and if you oppose Trump, he points you out, investigates you, and you have to close because your clients leave," comments an attendee.
In Cernobbio, they discuss the column in which Thomas Friedman suggests in The New York Times that the MAGA leader is launching a "cultural revolution" like Mao in China. The goal is not to establish a communist regime but to exterminate resistance: "Mao sent all young party cadres to attack anyone who thought: politicians, teachers, students, or doctors; he wanted to dumb down the entire population to rule without limits." Neither the Democratic Party nor academia has raised their voices yet: "Only the market does! It reflects the fear of a recession due to Trump's failed policies and makes less fanatical voters doubt, who are many." Multinational CEOs have called Scott Bessent, Secretary of the Treasury, to make Trump reconsider. "There's nothing to be done, now politicians are in charge, not economists."
The symbolism of tariffs is that they act as the repairer of the injustice suffered by the Detroit worker; it conceals the beginning of a revolutionary change process. "It's not a trade war, it's economic authoritarianism," published Bjorn Beam of Arcano Partners. Trump reserves the unique authority to impose tariffs on whoever he wants and imposes a right of first refusal. "It's not just corruption. It's structural capture. In corruption, individuals enrich themselves. This is something deeper and more dangerous: the transformation of the American economy into a personalized system of government." And what about Europe? In a trade war, "size matters." In a scenario moving towards autarky, the American economy would be the least affected (-5% of GDP in the long term), followed by China (-8%). Luxembourg would lose 80% of its wealth, and Spain nearly 15%. The larger the economies and the fewer barriers they have, the more resilient they become. Technicians remind that internal tariffs are 45% for goods and 110% for services among EU countries, starting with the very infrastructures. "If supply chains were decoupled, the damage to any European economy would be a third."
Enrico Letta, former Italian Prime Minister, outlined for the first time in last year's edition his report on market unity, which elevates him as one of the Europeanist intellectuals of the moment, alongside Mario Draghi. All agree that the crisis "is the catharsis that leads to opportunity". Europe has to see "how to become more resilient".
"The question today is to act, not to react". For politicians, everything goes through the integration of the European internal market and the opening of new ones without excluding the United States. We are in Italy and the relationship between its prime minister and Trump causes misgivings: "He has to clarify his debate between mom and dad". The same goes for Sanchez and China: "We must be cautious and not naive. The answer is Europe." Could the euro replace the dollar? "It's very difficult, but who knows. If they are encouraged to mutualize...". For the time being, the senior banker who opened this story will continue not to advise his clients to enter the United States, even if Trump withdraws the tariffs. "That's the least of it, because we don't know what he might do the next day."