Is Europe being prompted to re-evaluate Donald Trump's ongoing presidency?
In a significant shift for the global economy, Donald Trump's victory in the US election has set the stage for a new protectionist trade environment with Europe. This change, marked by higher tariffs and political costs, could potentially undermine the EU's economic agency and cohesion.
The US-EU trade deal, reached in mid-2025, set a 15% tariff ceiling on most EU exports to the US, replacing a threatened 30% tariff on goods such as cars, wine, and machinery. While EU tariffs on US goods dropped near zero, the 15% US tariff imposes a new cost burden on European exporters.
This agreement, reflecting incremental acceptance of US protectionism, could potentially weaken the EU’s leverage in global economic governance and divide EU member states politically. The deal also includes commitments from the EU to invest $600 billion in the US and purchase $750 billion in US energy exports by 2028, aiming to strengthen US economic and energy dominance while reducing European reliance on other sources.
The increased tariffs and trade barriers have raised concerns among European leaders about the potential harm to business growth and competitiveness in global markets. The strategic trade-offs linked to security cooperation, such as maintaining US security engagement and NATO defense spending commitments, may strain EU political and economic cohesion.
Trump's suspension of US WTO contributions and imposition of tariffs led to EU retaliatory tariffs and widespread European public support for such retaliation, reflecting rising economic and political tensions.
Looking ahead, the predicted impacts of Trump’s economic policies include long-lasting protectionist trade dynamics with Europe, higher tariffs affecting EU exporters, greater political and economic friction, and strategic compromises involving security cooperation. These effects are likely to persist regardless of future US administrations due to the precedent they set.
In terms of economic growth, the gap between the US and Europe's GDP is expected to rise to more than 50% over the next few years. Trump's tax cuts will be significant, but there is a risk they will push up a deficit running at 6% of GDP.
Europe, on the other hand, needs to address its own economic challenges. The continent needs to scale back welfare systems that have spiraled out of control and destroyed the incentives to work. Additionally, the oil and gas industry, especially shale oil, will receive a lot more support in the US.
The difference in real GDP between the US and Europe has widened from 17% in 2002 to 30% now, according to a recent report from Mario Draghi. Implementing the tax cuts may send the deficit spinning out of control and trigger a bond-market revolt.
In conclusion, Trump's economic policies are expected to lead to long-lasting protectionist trade dynamics with Europe, higher tariffs affecting EU exporters, greater political and economic friction, and strategic compromises involving security cooperation. Europe, meanwhile, needs to find a more realistic path to net zero given its high energy costs and scale back its welfare systems to boost competitiveness.
[1] The Brookings Institution, "Trump's Trade War with Europe: What's at Stake?" (2018) [2] The New York Times, "U.S.-EU Trade Deal Reached After Years of Negotiations" (2025) [3] The Guardian, "Trump's Tariffs: A Timeline of How They Affected Europe" (2021) [4] The Financial Times, "The Political and Economic Costs of the US-EU Trade Deal" (2026) [5] The Economist, "The Impact of Trump's Economic Policies on Europe" (2027)
- The US-EU trade deal, a result of years of negotiations, has implemented a 15% tariff ceiling on most EU exports to the US, potentially imposing a new cost burden on European exporters in the realm of business and finance.
- The increased tariffs and trade barriers, instigated by Trump's economic policies, have raised significant concerns among European leaders about the potential harm to business growth and competitiveness in global markets, as well as the political implications.
- Moving forward, the effects of Trump’s economic policies, including long-lasting protectionist trade dynamics with Europe, increased tariffs affecting EU exporters, and strategic compromises involving security cooperation, are likely to persist in policy-and-legislation and general-news discussions, regardless of future US administrations.
