Trump Wins Big, Germany’s Coalition Falls—A New Global Order?

As Trump reclaims the White House, Germany’s coalition collapses. Explore how these seismic events signal a shift in global power.

Donald Trump wins a landslide victory. On the same day, Berlin’s coalition government collapses. Both events are more connected than they seem: they echo a shift in the global order.

It is no coincidence that the German government coalition fell apart over disagreements regarding the debt brake—at its core, the conflict centres around how an ailing German economy can regain its vitality in a shifting geoeconomic environment. The proposed solutions could hardly be more different: former Finance Minister Christian Lindner advocates for neoliberal staples such as tax relief, deregulation, and fiscal discipline, while Chancellor Scholz pursues what economist Tom Krebs of Mannheim University terms “economic realism”—the acknowledgement that market-driven solutions may no longer work in a world disrupted by geo-economic competition.

Following Russia’s invasion of Ukraine, Europe and Russia have economically decoupled. While a complete decoupling of Western economies from China remains impossible due to extensive interdependence, the Biden administration has turned to export controls, investment restrictions, and a subsidy-driven industrial policy. Even in the homeland of neoliberalism, the security state has reclaimed political primacy over the market. Meanwhile, China’s state-directed capitalism surges to the technological frontier through heavily subsidised industrial policies. The resulting overcapacities, which China exports at dumping prices, threaten industries worldwide.

This intensified geopolitical competition pressures allies and partners to make investment decisions through a geopolitical lens. Companies face a choice between rival IT infrastructures, markets, and currency systems. Diversification, especially in high-tech sectors, is accelerating, potentially leading to competing economic blocs. The era of peak globalisation is behind us.

Together, these trends are reshaping the global economy. The paradigm is shifting from efficiency to resilience. Market interests no longer take precedence; national security considerations are back in charge. The state, once sidelined, is reclaiming control. The neoliberal model is officially dead.

In this environment, Donald Trump assumes the US Presidency once more. As during his first term, he will engage in fierce economic competition—not only with China but also with perceived “free riders” like Germany or Japan. The “Inflation Reduction Act,” a subsidy programme for US industries, offered American allies a preview of what’s to come. The export-heavy German economic model is facing the headwinds of protectionism and the geopolitically motivated reconfiguration of investments and supply chains. Segments of German industry, already struggling, will have to fight for survival against their strategically backed competitors from China and the United States.

From a security perspective, “America First” means Trump is likely to withdraw the US from costly “forever wars”, using agreements such as the 2019 deal with the Taliban or shifting the costs onto allies. For Europe, this implies bearing the primary burden of supporting Ukraine, ensuring the continent’s security, and stabilising its neighbourhood on its own.

Europe, particularly Germany, must rebuild its conventional deterrence capabilities and significantly boost defence spending—potentially beyond NATO’s 2 per cent of GDP target. Simultaneously, revitalising Germany’s industrial base will require substantial investments in infrastructure (mobility, digitalisation, education), energy supply, and climate protection. Over the next few years, the necessary investments and expenses could amount to 4 per cent of GDP annually. This cannot be achieved within the constraints of the debt brake foolishly enshrined in the constitution—it will have to be lifted. We are now witnessing politicians tying themselves in knots to justify this betrayal of their once dearly held beliefs.

The debate over the debt brake already signals upcoming distribution battles: who will bear the costs? Should it be the bottom third of social transfer recipients, which would spell the end of the welfare state as we know it? The middle third of white-collar workers through higher taxes? That would contradict the current social contract. Or the top third of capital owners through wealth and inheritance taxes? This would mark the end of neoliberalism in Germany. These pivotal decisions will upend the German party system, rendering it unrecognisable within a few years—much like in other European countries.

The “traffic light” coalition government was elected before the “Zeitenwende”, aka the Russian invasion of Ukraine. Since then, illusions regarding energy, fiscal, economic, defence, and migration policies have shattered. Germany must prepare itself for a dangerous world where the American security guarantee is no longer limitless, where global success factors for its economic model are fading, and where society is increasingly torn by distributional and cultural conflicts. As parties seek new answers, distributional battles over who bears the costs of necessary restructuring have already begun. The fractured coalition no longer possessed the strength to make essential strategic decisions. Thus, a new democratic mandate is needed to tackle these monumental tasks—new elections are the way forward.

German voters must decide how their country, which for the past 30 years has relied more than others on economic integration and political interdependence, will handle the disruptions of geopolitical competition and regain agency in a radically changed environment. The electorate faces a stark choice between fundamentally different economic models rooted not only in divergent ideologies but also in opposing interpretations of the geopolitical context.

If the SPD and the Greens, putting behind the trials and tribulations of the traffic light years, pivot towards a course of economic realism, they will face the neoliberal concepts of Lindner’s FDP and the ‘Mr. Blackrock’ Merz-led CDU in the next election. Left-wing populist Sahra Wagenknecht fundamentally denies the need for investments in defence capabilities and instead wants to increase social spending. The AfD, in a Trump-like fashion, views the world as a zero-sum game, where embattled nations fight for survival. For years, the democratic centre has been unable to find an effective remedy against this mixture of nativism, isolationism, and populism.

To counter the populist challenge, voters need a clear understanding of the upcoming challenges and their implications. The vast majority already realise that things cannot continue as they have and that their situation may worsen. They distrust politics and media, feeling that the true extent of the problems is concealed from them and fearing they will once again bear the brunt of the costs. This sentiment fuels populist mobilisation.

What is needed now is a speech of blood, sweat, and tears—one that candidly outlines the magnitude of the challenges ahead and proposes viable, albeit painful, solutions. It must awaken the German people to the reality that their cherished “island of bliss” amid crises and conflicts no longer exists, but also remind them of past triumphs over adversity and their capacity to fortify the nation against coming storms.