“And Just Like That” – Does NATO Even Exist Any More?

By Michael Every of Rabobank

Even shrugging off three-plus weeks of shocking headlines, some in markets must surely wake up today “And just like that…” realize the world around them has changed dramatically. We no longer live in a market dream Manhattan with glamour, lunches, petty insults, and expensive shoes. Rather, we are in a reality with clamor, golf games, petty insults, and expensive jackboots.

President Trump has called President Zelenskyy a corrupt “dictator” who ‘started the Ukraine War,’ warning he must make a deal while he ‘still has a country left.’ That sounded like Kremlin terminology to many European ears. Yet the US walking away from Ukraine without them even being at the table is no shock historically: does one not recall the fate of the Afghan government? Or President Mubarak? Or the South Vietnamese?

pic.twitter.com/PMcrOwXejI

— Donald J. Trump (@realDonaldTrump) February 19, 2025

In response, Europe is assembling a crisis group of the EU, except Slovakia and Hungary, and of Europe’s Clean New Industrial Deal is also a U-turn from neoliberalism. In short, it argues for “made-in-EU” quotas for both the public and private sectors and carbon product labels — economic statecraft non-tariff barrier local content rules– to make 40% of clean tech in Europe rather than buying it from China. Furthermore, to bring down energy costs the plan is to cut energy taxes and use the European Investment Bank to lend vast sums for new grid and LNG plants, etc. –economic statecraft subsidies and/or off-book quasi-fiscal spending– and an “EU critical raw material centre” to “jointly purchase raw materials” for groups of companies – economic statecraft market intervention. Naturally, this means more zero-sum global trade policy.

Summarising things, the Financial Times has an op-ed bewailing “Who will stabilize the global economy?” It points out a century ago the rising US giant, then still number two to the wounded post-WW1 British Empire, was a mercantilist rather than a stabilising force. We know how that ended in 1929, the 1930s, and the 1940s. Today, the US is going back down that path in response to a mercantilist China which never tried to go anywhere else – and so nobody is going to stabilise the global economy.

The latest Fed minutes discussed the possible effects of changes in US trade and immigration policy, as well as differentiating between the temporary and the persistent inflation impacts. Frankly, they haven’t got a clue about that, or any of the above news. Indeed, it’s unfair to expect them to –our contemporary central bankers are just not cut from that kind of intellectual cloth– and a few Fed members might even be looking at the treatment of Zelenskyy and feeling nervous.

For now, US rates are clearly on hold, following which the Fed will say “And just like that…” and…