Five reasons Trumponomics need not weaken Europe, even the opposite

The consensus view currently holds that the great divergence between the US and EU economies observed since the pandemic is bound to continue. As a snapshot of current conditions, it is certainly true that the US economy has a strong growth momentum and bullish animal spirits, while Europe has neither. But extrapolating from a snapshot, as instinct tempts us to do, is often wrong. In fact, there are solid reasons to expect the gap between US and Europe growth to shrink in 2025—as envisioned in BNP Paribas’ central scenario, with the US economy slowing down and the Eurozone’s accelerating (albeit modestly so). Beyond the year-ahead outlook, there are at least five reasons to challenge the view that Donald Trump’s economic policies will make Europe even weaker. Let’s consider them in turn.

1. Europe was built through crises, as founding father Jean Monnet famously said

The return of Trump to the White House is undoubtedly perceived by European policymakers as a crisis. Conveniently arriving on the heels of two landmark reports by former Italian Prime Ministers that provide a roadmap for the EU to make itself fit for preserving its place in the world for decades to come, this crisis has already started accelerating much needed change. Instead of being shoved into drawers around EU government palaces, these reports have provided the bulk of the ingredients for the EU’s 5-year work plan, renamed “competitiveness compass”.

“Europe is ready for change” summed up EC President Ursula von der Leyen in Davos a few weeks ago. Just five months ago, the consensus in Brussels was that member states broadly agreed on the diagnostics, but were so far apart on the remedies that little would happen. Now, there is good reason to believe we will see changes of the same order of magnitude as those brought about by the Covid pandemic: with deeper and better integrated internal markets for goods and services; with far more firms operating at scale; with more pragmatic regulations; and with higher investment—both collective among member states and by the private sector—including in areas critical to economic sovereignty, green transition, and defense. This won’t happen overnight, but the EU has as good a chance as ever to come out of this latest crisis stronger.

Download the Full Report!