In that case, the Confederate would have been the junior partner.Maybe the Union would still be democratic, but instead of growing weaker Philadelphia decides to pull an Anglo-Russian Convention with the Confederacy (albeit with gritted teeth), for two key reasons:
One, the Union is willing to recognise Confederate control over Nicaragua (the CSA wants their Nicaragua Canal and has already built it ITTL) and formerly Spanish Cuba and Puerto Rico in exchange for Confederate recognition of Baja California as rightful Union territory. The CSA agrees, and even cedes Chihuahua and Sonora to the Union to allay Union fears about being encircled, since they would lose to the Union in the event of another war and already have access to the Pacific thanks to the Nicaragua Canal anyway.
Two, the threat of an expansionist Japan to the west. The Union and Confederacy decide that it's better to cooperate in fending off Japanese influence in the Pacific and Americas than to let Japan pit them against each other and take the spoils in the event of yet another Union-Confederate war. The Union might be a democracy, but still not exactly super welcoming to the Asian races by any means.
Maybe when the alt-USSR forms, things will really go to shit for both the US and the Confederacy, what with this alt-USSR backing vanguardist (TTL's analogue for communists) movements in North America and the internal unrest within both states contributing towards their defeat at the hands of the United States of Mitteleuropa (basically a merger of the German and Austro-Hungarian Empires) and the remaining Allied Powers (mainly Italy and Spain, plus a Bonapartist France that switched sides to prevent the total collapse of their empire) as their own people rise up in revolt.
I don’t see Japan progress faster than IOTL. They won’t be a threat until the 1920s. Besides, since the Confederacy has no presence in the Pacific, they should not worry about Japan.
Plus, unlike the Confederacy, the Union would not suffer much instability and unrest. Also, over the long run there would be more Progressive social/political reforms passed in TTL Union - and that would marginalize communism.
I will have to note that IOTL, US North had as much industry as Britain and Germany combined by 1914, and was running away from both powers even before OTL WW1. It would have dwarfed this “United States of Mitteleuropa”, since A-H is not going to surpass Britain, not in the 1910s-1930s. Plus, there is an entire Atlantic Ocean separating US and Europe.
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