Europe must rapidly readjust to dodge the wrecking ball Trump wields over global trade system

The barely credible fact that Trump slapped 25% tariffs on Canada and Mexico almost got lost in the maelstrom of history-making news

- Heather Stewart

Forget the "Trump put", as financial analysts called the bet that the US president's policies would unleash a winning era for the nation's stock markets. By Friday, the chat was of the "Merz spurt".

The decision by Friedrich Merz, the German chancellor-in-waiting, to cut a deal on ditching Germany's debt brake - still to be confirmed by parliament - marked a seismic shift.

The EU country most associated with strict fiscal discipline is now contemplating what could in principle be unlimited borrowing to fund Europe's defence. Lifting the brake, widely regarded by experts as an unnecessarily tight constraint on public spending, cheered European markets.

Merz's abrupt about-turn, after arguing for spending restraint during the recent election campaign, is part of a dramatic EU-wide push to "rearm Europe". The president of the European Commission, Ursula von der Leyen, suggested as much as €800bn (£670bn) could ultimately be mobilised to create a bulwark against Russia, as the US withdraws. In other words, Donald Trump's isolationist turn has dramatically galvanised the EU.