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Trump’s Politics and Financial Policies: What They Mean for Europe, the UK and Americans Living Abroad

Donald Trump’s return to the White House has changed the economic and political environment facing Europe, the United Kingdom and millions of Americans who live or work outside the United States. His administration’s approach—centered on tariffs, “America First” trade policy, tax changes, pressure on NATO allies and a more transactional approach to international relations—has consequences that extend well beyond U.S. borders.

For Europeans and Britons, the effects can be seen in trade, investment, defence spending, energy policy and the cost of doing business with the United States. For Americans living overseas, the consequences are more personal: U.S. citizens remain subject to U.S. taxation on worldwide income even when their lives, jobs and finances are based entirely in another country.

The effects are not uniformly negative or positive. Some American businesses may gain from protectionist measures and increased domestic investment, while European and British companies may gain from negotiated access to the U.S. market. At the same time, tariffs can increase costs, disrupt supply chains and make international investment decisions more complicated.

A more protectionist America

One of the clearest changes under Trump has been the greater use of tariffs as an economic and foreign-policy instrument.

The administration argues that tariffs can protect American manufacturing, encourage companies to produce more goods in the United States and reduce America’s trade deficit. The policy is intended to make foreign producers bear more of the cost of accessing the American market.

For European and British exporters, however, a U.S. tariff is effectively an additional cost of selling into America. Companies may absorb some of the cost themselves, raise prices for American customers, reduce exports or move portions of their production.

The UK has already experienced this dynamic. The Office for National Statistics reported that British goods exports to the United States, excluding precious metals, fell by £1.5 billion, or 24.7%, in April 2025 after the introduction of U.S. tariffs and remained relatively low thereafter. British car exports were particularly affected. (Office for National Statistics)

The situation is more complicated than simply “tariffs on Britain,” however. The UK and U.S. subsequently negotiated an Economic Prosperity Deal that reduced U.S. tariffs on the first 100,000 UK cars exported each quarter from 27.5% to 10%. By 2026, the UK government also reported a zero-tariff arrangement for pharmaceutical exports to the United States. (GOV.UK)

This illustrates an important feature of Trump’s approach: tariffs can function both as economic barriers and as bargaining tools.

Europe faces a similar dilemma

The European Union has faced an even larger challenge because the EU is one of America’s most important trading partners.

In 2025, the United States and EU reached a framework under which the U.S. would generally apply a 15% tariff rate to EU-origin goods, while the EU agreed to eliminate tariffs on U.S. industrial goods and provide preferential access for various American agricultural and seafood products. (Trade and Economic Security)

The agreement was designed to prevent a much larger escalation in the transatlantic trade dispute. The European Commission subsequently said the arrangement had helped restore greater stability and predictability to the relationship. EU-U.S. trade in goods and services reached €1.8 trillion in 2025. (Trade and Economic Security)

Nevertheless, a 15% U.S. tariff on many European goods changes the economics of exporting to America. Industries with thin profit margins—such as automobiles, machinery, chemicals and other manufactured products—can be particularly sensitive to additional costs.

European companies may respond by increasing production in the United States, accepting lower margins, raising prices or redirecting investment toward other markets.

That creates a potential long-term effect: Trump’s trade policy may encourage multinational companies to think of the United States not simply as a major market, but as a location where they need to manufacture in order to avoid trade barriers.

The dollar, inflation and financial markets

Trade policy also affects financial markets.

Tariffs can push up the price of imported goods, although the ultimate effect depends on exchange rates, company margins, supply chains and the response of consumers. They can therefore complicate the Federal Reserve’s efforts to balance inflation against economic growth.

For Europeans, exchange-rate movements are particularly important. Someone earning euros or pounds but investing in U.S. assets—or receiving U.S.-dollar income—can see the value of that income change substantially as the dollar moves.

The reverse is also true for Americans living abroad.

An American living in France, Germany, Spain, Britain or Scandinavia may earn euros or pounds but still have U.S.-dollar liabilities, investments, pensions or tax obligations. A significant change in the dollar’s value can therefore alter the real value of savings and income even when the person’s local salary has not changed.

Trump’s economic policy also includes a willingness to use tariffs in response to broader international payments and economic concerns. In February 2026, for example, his administration imposed a temporary 10% import surcharge under Section 122 of the Trade Act, citing international payments problems and concerns about the U.S. economic position. (The White House)

This illustrates how trade, currency and financial policy have increasingly become interconnected.

Europe’s defence bill is another major consequence

Trump’s influence on Europe is not limited to trade.

His long-standing criticism of European NATO members for insufficient defence spending has contributed to a much greater emphasis on European military investment. At the 2025 NATO summit in The Hague, NATO members agreed to a long-term target of investing 5% of GDP annually in defence and defence-related security spending by 2035. (NATO)

NATO reported in 2026 that European allies and Canada had increased defence expenditure by nearly 20% in real terms in 2025 compared with 2024. (NATO)

For European governments, this creates a difficult budgetary choice.

More money going to defence potentially means less money available for other priorities unless governments raise taxes, borrow more, reduce spending elsewhere or achieve stronger economic growth.

For European companies, however, increased defence spending can mean new contracts and investment. European aerospace, cybersecurity, electronics, shipbuilding and defence manufacturers may see increased demand.

There is therefore an important distinction between the fiscal cost to governments and the commercial opportunity for particular industries.

The UK occupies a special position

Britain is affected by Trump’s policies in two directions.

On one side, the UK has a close security and intelligence relationship with the United States and remains one of Washington’s most important European partners.

On the other, Britain is no longer part of the EU and therefore negotiates its trade relationship with Washington separately.

The UK-U.S. Economic Prosperity Deal demonstrates the advantages and disadvantages of that position. Britain has been able to negotiate specific concessions, including reduced automobile tariffs and preferential arrangements for pharmaceuticals and agricultural products. (GOV.UK)

But Britain is also highly exposed to changes in U.S. policy because the United States is its largest goods export partner. Official British statistics show that U.S. tariffs have already affected British exporters, particularly manufacturers and car companies. (Office for National Statistics)

The British government therefore faces a balancing act: maintain close economic and political relations with Washington while protecting Britain’s ability to trade with Europe and the rest of the world.

Americans living abroad face a different problem: they are still inside the U.S. tax system

For Americans living overseas, perhaps the most important issue is one that receives considerably less public attention than tariffs: the United States taxes its citizens based on citizenship rather than simply residence.

A U.S. citizen living permanently in Europe generally still has to file a U.S. tax return and report worldwide income. The IRS confirms that citizens and resident aliens living abroad remain subject to U.S. tax on worldwide income, although foreign tax credits and exclusions can prevent or reduce double taxation in many circumstances. (IRS)

This means an American living in London, Oslo, Paris or Berlin can have tax obligations in two countries.

Suppose, for example, that an American citizen works for a European company and receives a salary in euros. The person may have to report that income to the U.S. government as well as to the country where they live.

The same can apply to investments, bank accounts, pensions, business interests and other financial assets.

FATCA and foreign financial accounts

The complexity becomes greater for Americans who have ordinary financial lives abroad.

A person may have a local bank account, investment account or pension that is completely routine in their country of residence. But U.S. reporting rules can require certain foreign financial accounts and assets to be disclosed.

The IRS states that Americans abroad may have to file an FBAR when their foreign financial accounts exceed the applicable reporting threshold. The general FBAR threshold is more than $10,000 in aggregate at any point during the year. (IRS)

The Taxpayer Advocate Service has described the compliance burden facing Americans abroad as substantial, noting that they must navigate U.S. tax rules alongside the tax and financial systems of their countries of residence. (Taxpayer Advocate Service)

This is particularly significant for Americans who are not wealthy.

An American living abroad does not necessarily owe additional U.S. income tax after taking account of foreign tax credits and exclusions. But they can still face substantial compliance costs: accountants, tax advisers, additional forms and the risk of penalties for mistakes.

The problem of “accidental Americans”

The system can be especially complicated for people who do not think of themselves as Americans in everyday life.

Someone born in the United States to foreign parents, for example, may have moved abroad as an infant and spent virtually their entire adult life in another country. Yet U.S. citizenship can still carry tax and reporting responsibilities.

The same can apply to people born abroad to American parents.

For these individuals, the issue is not necessarily the amount of tax they owe. It can be the administrative burden of proving compliance with two different financial systems.

Renouncing U.S. citizenship is possible, but it is not simply an administrative change of nationality. U.S. expatriation tax rules can apply to certain people who relinquish citizenship, including individuals meeting specified income, net-worth or tax-compliance tests. (IRS)

Trump’s tax changes and Americans abroad

Trump’s domestic tax legislation also matters to Americans living overseas, even though much of the public discussion focuses on people living inside the United States.

The 2025 tax legislation known as the One Big Beautiful Bill Act changed several elements of the U.S. tax system, including deductions and other provisions affecting individual taxpayers. The IRS’s current guidance specifically identifies provisions affecting taxpayers for 2025 and subsequent tax years. (IRS)

The effect on an American abroad depends heavily on personal circumstances.

Someone earning employment income in Europe may be affected differently from an American entrepreneur running a business overseas. A retiree receiving U.S. Social Security may have a different tax situation from a person with European investments or a foreign pension.

This is why broad claims that a particular U.S. tax change “helps” or “hurts” Americans abroad can be misleading.

Investment decisions may become more complicated

Trump’s policies also influence where businesses choose to invest.

If importing goods into the United States becomes more expensive, a European company that wants access to the American market may have a greater incentive to build factories or distribution operations inside the United States.

That can benefit the U.S. economy through construction, employment and investment.

But it can also create a difficult choice for Europe. Capital invested in an American factory is capital that might otherwise have been invested in a European factory.

Over time, this could influence the geography of industrial investment.

The same consideration applies to American companies operating in Europe. If the policy environment becomes more protectionist on both sides of the Atlantic, companies may find themselves managing multiple regional supply chains rather than one integrated global production system.

Energy policy links America and Europe

Energy is another important part of the relationship.

The United States has become a major energy supplier to Europe, particularly in liquefied natural gas. The 2025 EU-U.S. trade agreement included a commitment for the EU to purchase substantial amounts of U.S. energy through 2028. The White House described the commitment as $750 billion, while the broader political and commercial implementation depends on actual purchases and market conditions. (The White House)

For Europe, greater reliance on American energy can strengthen energy security by diversifying supply.

But it can also make Europe more economically dependent on U.S. energy markets and American foreign policy.

For the United States, increased energy exports can support producers and strengthen America’s position as an energy supplier.

What does all this mean for ordinary people?

The effects of Trump’s policies are often discussed in terms of presidents, governments and corporations. But the consequences eventually reach households.

Europeans may experience:

● Changes in the price of imported American and European goods.

● Greater government spending on defence.

● Changes in energy prices and energy security.

● New opportunities for defence and industrial companies.

● Greater uncertainty for businesses dependent on U.S. exports.

● Potential changes in exchange rates and investment returns.

Britons may experience:

● Changes in the competitiveness of British exports to America.

● Different conditions for cars, pharmaceuticals, steel and agricultural products.

● Increased pressure to balance the U.S. relationship with Britain’s European economic interests.

● Greater defence spending.

● Changes in the cost of American goods and services.

Americans living abroad may experience:

● Continued U.S. taxation of worldwide income.

● Complex interaction between U.S. and local tax systems.

● Foreign-account reporting requirements.

● Changes in U.S. tax deductions and credits.

● Currency-related changes in the value of income and investments.

● Greater difficulty managing U.S. and foreign pensions, investments and bank accounts.

● Potential changes to the practical cost of maintaining U.S. citizenship and financial connections to America.

A transatlantic relationship that is becoming more transactional

Perhaps the most important long-term consequence is a change in the way the United States, Europe and Britain interact economically.

For decades, the transatlantic relationship was built around relatively low trade barriers, expanding globalization and the assumption that economic integration was broadly beneficial.

Trump’s approach places greater emphasis on reciprocity, national production, tariffs, domestic employment and the willingness of allies to contribute more to their own defence.

The resulting relationship is not necessarily a complete break with the past. The United States and Europe remain deeply economically connected. The EU-U.S. relationship alone involves enormous flows of goods, services and investment, while Britain and America continue to maintain exceptionally close economic and security ties. (Trade and Economic Security)

But the rules governing that relationship have become less predictable.

For governments, that means more pressure to develop alternative trading relationships and strengthen domestic industries.

For companies, it means greater attention to where goods are produced and how supply chains cross borders.

For investors, it means currency, tariffs, interest rates and geopolitical risk matter more.

And for Americans living abroad, it means remembering that moving overseas does not remove them from the American tax system.

Conclusion

Trump’s economic and political policies are reshaping the relationship between the United States and its traditional allies.

Europe is being pushed toward greater defence spending and greater strategic autonomy while simultaneously negotiating with Washington over tariffs, energy and industrial policy. Britain is attempting to secure preferential access to the American market while maintaining its wider European economic relationships. American citizens living overseas continue to navigate a tax system that follows them across national borders.

The central issue is therefore bigger than tariffs.

It is about where investment takes place, who pays for defence, how much governments rely on international trade, how currencies and taxes affect individuals, and how closely the United States remains economically integrated with its allies.

For Americans abroad in particular, the most important lesson is that U.S. politics does not stop at the American border. Decisions made in Washington can affect a person’s taxes, investments, retirement planning, banking relationships and even the economics of where they choose to live and work.

At the same time, the effects are not predetermined. Trade agreements can reduce tariffs, companies can adapt their supply chains, governments can negotiate exemptions, and individuals can use existing tax treaties and foreign-tax credits to manage some of the consequences.

The transatlantic economy is therefore entering a period of adjustment rather than simply moving from one fixed system to another. The decisions made by governments, businesses and individuals over the next several years will determine how much of that adjustment becomes a lasting restructuring of the relationship between America and Europe.