U.S. election day is across the nook, and the presidential candidates, Donald Trump and Kamala Harris, are in what guarantees to be a nail-biting race to the end.
The end result of the election is crucial to America’s future and that of the remainder of the world—maybe nowhere extra so than Europe.
The previous continent has come to rely closely on the U.S. for commerce and protection ensures, which raises the stakes for the area because it grapples with financial volatility, slipping competitiveness, the rise of right-wing nationalism, and heightened safety dangers as a consequence of Russia’s invasion of Ukraine.
Take Trump, for example. He has made no secret of his ambitions to make European commerce costlier, including to inventory market jitters that the area may emerge a loser. And Harris may put additional stress on Europe to push away from China.
Fortune spoke to main specialists forward of the election to share their evaluation of the potential influence on Europe.
1. Crippling tariffs
The U.S. is the European Union’s largest commerce companion. Over time, the nations have established a mammoth-sized commerce relationship that employs 16 million folks on either side of the Atlantic and trillions of {dollars} in commerce and investments. That’s not all—half of Europe’s output comes from commerce, which now stands uncovered.
Trump, the Republican candidate, plans to impose a further 10%-20% in cross-border tariffs, making commerce costly and probably weakening the euro.
“Tariffs will seriously dampen the EU’s economic growth,” Zach Meyers, assistant director of the Centre for European Reform, advised Fortune.
This isn’t a far-fetched end result, given Trump slapped tariffs on metal and aluminum imports from the area throughout his first time period as president. Extra tariffs may damage economies like Germany’s, which has been struggling and is closely depending on U.S. exports, shrinking GDP by 0.23%, research present.
Stuart Franklin—Getty Photos
“The prospect for retaliatory measures regarding the $350bn+ of US exports to Europe means households and businesses would be faced with higher prices, which would eat into consumer spending power and hurt corporate profits in Europe,” mentioned James Knightley, ING’s chief worldwide economist.
Brussels is already gearing up for the way the election and a harsh tariff regime may play out.
Nonetheless, if Europe wins an exemption from Trump’s tariff regime, it “could boost European firms’ relative competitiveness in the U.S.,” mentioned Meyers.
Tariffs are Trump’s modus operandi. However, Harris would take a extra diplomatic strategy and enhance stress on the EU to reevaluate its financial ties with Beijing. In spite of everything, the U.S. has used its diplomatic clout to nudge Europe earlier than—together with chopping ties with Chinese language telecom large Huawei.
Both method, Meyers expects that the three-way relationship between the U.S., China, and Europe will doubtless get difficult. Harris would encourage European firms to make extra items within the U.S., carrying ahead the strategy of her predecessor, President Joe Biden.
Each Trump and Harris will doubtless hike tariffs on China, forcing the Asian superpower to dump extra exports on Europe (than it at the moment does) and rising the chance of a full-blown commerce battle, Meyers mentioned.
2. Enterprise uncertainty
Whereas tariffs are one strategy to put “America first,” as Trump touts, the election may simply be the start of an total international shift in temper music.
“There is concern that President Trump could bring significant change to both the economic and geopolitical environment,” mentioned Knightley. “Harris is effectively the continuity candidate and as such is viewed as less threatening.”
Europe’s trailing competitiveness in tech, innovation, and protection has turn out to be an “existential challenge,” as former European Central Financial institution President Mario Draghi highlighted in September.
Simon Wohlfahrt—Bloomberg/Getty Photos
“There are growing worries that the EU also needs a stronger role in AI to avoid a new set of future dependencies,” Meyers mentioned. In a latest report he coauthored, Meyers means that aligning U.S. and EU tech laws may profit each nations by enhancing productiveness and the commerce of tech providers.
Whereas Europe is making an attempt to spice up its standing within the fast-paced and cut-throat world of innovation, it’s additionally constructed a infamous status for scrutinizing U.S. Huge Tech firms for his or her on-line security and antitrust practices.
Trump just lately complained in regards to the EU imposing a multibillion-dollar tremendous on Apple, promising to take motion if he wins the election. He has hit again at European laws previously, too.
There may be a lot uncertainty—and curiosity—about what every candidate may imply for Europe’s potential to innovate and regulate. Nonetheless, the area continues to be largely answerable for altering its destiny on that topic.
“It is really up to European policymakers to create an environment that can allow them to grow and scale up to the level to compete with the major U.S. names. Unfortunately, I am not confident that will happen,” Knightley mentioned.
3. Protection
Geopolitics is one other key space the place the 2 candidates’ differing approaches may influence Europe. Years of poor protection funding and the escalating Russia-Ukraine battle have left the EU able the place it wants the U.S. for help.
In that backdrop, “the Trump effect on Europe and the EU will be negative—more negative than it would be in the Harris administration,” Steven Blockmans, an affiliate senior analysis fellow on the Centre for European Coverage Research, advised Fortune.
Trump has threatened to give up NATO previously. He even went as far as to say that he would “encourage” Russia to “do whatever the hell they want” to NATO nations that don’t pay in direction of the alliance, Politico reported earlier this 12 months. If Trump decides to alter course on supporting Ukraine, European nations will enhance protection spending shortly to bolster nationwide safety.
Alex Nicodim—Anadolu/Getty Photos
Harris has mentioned that if elected, she is going to stand by the protection alliance and Ukraine. She is predicted to largely comply with Biden’s overseas relations path with a number of tweaks of her personal.
Blockmans mentioned the massive query relating to a second Trump administration is whether or not “it will still be adults in the room” when making coverage selections.
One other danger of a Trump 2.0 is that his energy may embolden different far-right European leaders, equivalent to Hungary’s Viktor Orbán.
“There are very strong streaks of autocracy in Trump’s approach,” Blockmans mentioned, cautioning that different elements additionally affect the recognition of Europe’s political figureheads past the affect from throughout the Atlantic.
“In 2024-25, Europe and the EU’s [are] unfortunately in a more dependent situation in transatlantic relations, and that is why it matters even more that there is stability, predictability, and support.”
