Martin Wolf: “The US broke every rule they created”

Mr. Wolf, today’s headlines make it seem like we’re moving from one economic crisis to another. How do you assess the current state of the international economic order?

It’s not an order anymore. It’s a disorder. The institutions are under enormous stress; some have essentially disappeared as relevant. The economic system doesn’t operate according to predictable rules anymore. Look at the rise of trade protectionism. In a year, the US has reinstalled protection levels of the 1930s – they broke every rule they created. At the same time, nearly every state is running massive fiscal deficits and is likely to continue doing so far into the future – even in peacetime.

Is there anything the EU and the UK can do to secure their place in this disorder?

They must work hard to take advantage of their strengths. Failing to complete the European single market is literally suicidal. You can’t compete with the United States and China like this. And Europe and Britain should lead the way in preserving as much liberal trade as possible because they will always be dependent on global trade. And Europe must defend itself against predators, the most important are the United States and China. This means Europe must be willing to exert force. Finally, Europe will have to invest heavily to catch up in technologies where it is currently far behind.

Speaking of what you call „predators“… According to our survey, 38% of Germans say that the US poses a major threat to their economy. What do you think?

I think it’s possible. US trade policy is important for Germany because the country is extraordinarily dependent on exports—particularly goods, which are directly affected by tariffs. Services, by contrast, are not. Compare this with the UK, one of the world’s largest exporters of services, which is therefore far less threatened by tariffs or by any of Donald Trump’s policies. In the long run, however, China is the bigger threat.

Why is that?

China wants to be like Germany

...export-oriented and with large trade surpluses.

but on a much bigger scale. And the problem is that China can be Germany on a much bigger scale because it’s much bigger. So, I think Germany has significant problems with both superpowers due to its modest size and the nature of its comparative advantage. Germany doesn’t have the power to protect itself.

In our annual survey, 73% of respondents said Europe is too cautious in asserting its economic interests against the United States. Can’t you understand Commission President von der Leyen’s cautious approach given our heavy dependence on the US?

Von der Leyen must stand up for Europe, without ending up in an uncontrollable conflict with the US on everything. That is the core dilemma. Because the reality is that, in such a confrontation, Europe would likely come out weaker. So to be honest, I feel very sorry for her.

How do you look at the future of the transatlantic relationship?

In the foreseeable future, the United States remains the primary guarantor of Europe’s security, because Europe is not yet a true security power – though it may become one over time. But the US also provides services besides defence that are critical to Europe’s functioning; most importantly cloud services. They could cut them off, no question they could. So we are not in a position in Europe to be independent of the US, while at the same time, we have big problems with them.

Germany has loosened its debt break and is now investing heavily in defence and infrastructure with the goal of becoming less dependent on the US security umbrella. Does that make sense from an economic point of view?

Defence assets are very important, but they’re not productive assets. But on the other hand, productive assets aren’t worthwhile if you can’t defend them. So, I think t there must be an increase in defence spending and using part of these funds for infrastructure is better than nothing, because by that you can improve the capital asset situation in Germany. But it will work best if the aggregation of this spending leads to faster growth. Defence spending will only really increase growth if it generates faster technological progress or improves demand. More broadly, if Germany is going to borrow and spend, it must ask itself how to raise its very low growth rate. That will be the most important determinant of future prosperity.

You once said that Donald Trump’s chaotic protectionism is a fraud against the American people. When are we going to see the price for that protectionism playing out in the US?

It may never play out politically. The most important quality of a successful demagogue, I don’t think I need to say this in Germany, is that you can cheat the people almost indefinitely. You can create an alternative reality. People need to recognize what is going on. But a vast number of people in America trust Donald Trump. They don’t trust him absolutely, but they trust him a great deal because they’re in an echo chamber. Once you have a fragmented echo chamber in your media system it really is difficult to bring the demagogic politicians to account. With luck however, if the elections are fair, which is a very big if, and if it becomes obvious that cumulatively this isn’t bringing back the jobs, then maybe, in time, we will get back to a more stable situation.

16.03.2026

In cooperation with Table.Media, The Berlin Pulse Express Edition combines the foreign policy attitudes of Germans with expectations of Germany from abroad.