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Donald Trump’s electoral win in the US has boosted populist stances in Europe and created much uncertainty for the banking sector, both of which could have serious implications for trade agreements with the region.

While the president elect started his campaign with strong rhetoric that threatened to ‘tear up’ existing trade agreements, this has somewhat shifted to a more consultative approach calling for renegotiations. Nonetheless, he has given strong signals that he will lead the US away from being a global trade liberalisation advocate, to one that is geared heavily towards national interest.

This stance not only throws existing and planned trade deals with the US into question, but it is one that has been gaining traction among member states of the European Union.

“The EU is probably going to go down a road of more aggressive enforcement of its own trade laws and more broadly the trade laws agreed in the US,” partner at King and Spalding’s international trade practice, Iain MacVay, tells GTR.  “There are lots of signs in Brussels that the commission is wanting to enforce agreements already in place.”

I think the move towards a more protectionist stance was on the way for quite a long time before the Trump victory  Daniel Capparelli, Global Counsel

Advisor at think tank Global Counsel, David Capparelli, comments: “I think the move towards a more protectionist stance was on the way for quite a long time before the Trump victory. If you look at the French proposal that was announced a couple of days ago on how to reform EU trade policy it does go in that direction. But I’m not entirely sure this is going to translate into a more protectionist policy – but a less liberal trade policy.”

At the heart of current EU-US trade negotiations is the Transatlantic Trade and Investment Partnership (TTIP). The partnership aims to promote trade between the EU and its biggest export market, by cutting tariffs and standardising regulations. After missing an original completion deadline in 2014, TTIP has faced numerous obstacles, with the Trump win now adding to that list.

“TTIP is already pretty much dead,” says MacVay. “Everything’s speculation, we don’t know what he will actually do when he gets into office and has the benefit of the counsel and all the facts…. but I think you have to believe that the future for TTIP is naught.”

While the general consensus appears to follow this view, hope that the EU, if anywhere, could be an easier option for Trump to demonstrate his deal-making capabilities have also been suggested.

“Trump hasn’t made any particular speech towards TTIP. It wasn’t one of the main focuses during his campaign so potentially, he may use the EU as one of the examples of his deal-making skills. He has put a lot of emphasis on that during the campaign,” says Capparelli.

“At the end of the day because Trump is such an unknown we can’t make conclusions about TTIP. The question is much more on the EU side than the US side. With member states [you can] see a clear trend towards skepticism against TTIP and this is a key concern.”

EU elections

The rise of populism isn’t only dictating the direction of trade deals for the EU but is also bringing the very unity of the EU to the fore. Trump’s win, coupled with the UK’s decision to leave the bloc earlier this year, has given a substantial boost to more conservative agendas and calls for referendums in other countries. With five member states facing presidential elections next year, the strength and efficiency of the EU is currently undermined.

“I think what you see in the short term is a more cautious, conservative approach by the EU. Political leaders will be very careful not to go beyond any red line imposed by these populist movements. [They will try] not to upset domestic constituencies with policies that go for liberalisation,” says Capparelli.

Dodd-Frank and London

The Trump campaign has also voiced that it will revisit post-financial crisis banking regulations, including the Dodd-Frank Act. With the current banking climate in Europe and complaints of over-regulatory practices hampering growth, there has been much speculation that should this happen, banks could shift their bases across the pond. Such a move would hit Europe’s finance capital London in particular, where the banking sector is already facing uncertainty following Brexit.

“If there is a loosening of regulation, we don’t know that there will be, what it means is that American banks can start operating in the way they did before the financial crisis,” chief economist at British Bankers Association, Rebecca Harding, tells GTR.

“There’s been a lot of speculation on where European and US banks will locate and whether or not American banks will move back to the US. They will go wherever the environment is best for them to do their business and perform well. Who knows where that’s going to be.”

While a repeal of Dodd-Frank will largely be seen as a step backwards for many, it could be a step forward for trade negotiations with the EU.  A major sticking point for TTIP has been the unwillingness of the US to negotiate key issues of interest to the EU, such as government procurement and financial services.

“The US refusal in the case of financial services, to have a chapter to negotiate financial services, was because it was very reluctant to undo anything that was related to the Dodd-Frank Act,” says Capparelli.  “So anything to do with that was off the table and the treasury was quite adamant about that. In that case [Trump’s plans to revisit the act], one could conceive that in the medium term the US could review the position on financial services.”