One topic often overlooked as the US 2024 presidential elections approach is the potential impact of the election on other regions, especially Europe.
The stakes are high for Europe’s economy with Vice President Kamala Harris and the former president Donald Trump in a close race.
It is possible that the outcome of this election could have a dramatic impact on trade, defence spending and economic reforms in Africa.
Can a Trade War erupt?
As they watch the US elections unfold, European business leaders and policymakers are most concerned about trade.
The second Trump administration would probably bring with it more protectionist measures, such as 10-20% tariffs for all imports. This would have a direct impact on Europe.
Trump, during his first term as president, placed tariffs on a variety of European products, including Spanish Olives. This led to a 70 percent drop in US exports.
European businesses are bracing themselves for the potential fallout of a Trump 2.0 presidency.
A Harris presidency, on the other hand, would probably maintain President Joe Biden’s status quo, which was not particularly favorable to free trade.
Harris will not rollback the tariffs that Trump has already imposed, but she is likely to avoid the potential escalation that many feared could result from a Trump win.
She would likely continue Biden’s focus on American Jobs, led by policies such as the Inflation Reduction Act, which has already sparked concern in Europe about its impact on EU Competitiveness.
This is an important issue for Europe where the trade is responsible for half of its economic output.
Exports are a major part of the EU’s economy, particularly in industries like automobiles and machinery. These sectors would feel the effects first if new US tariffs were implemented.
Goldman Sachs estimated that Trump’s tariffs would reduce eurozone GDP by 1%, which is a serious blow to an economy already in trouble.
Can Europe afford Trump’s presidency?
NATO and military spending will also be a major issue in the US elections, but Europe is the one that stands to suffer the most.
Trump repeatedly criticised European NATO member states for not meeting the 2% GDP military expenditure target and hinted that US support would be reduced if they did not meet this goal.
Harris, on the other hand, is expected to continue Biden’s strategy, which encouraged Europe to raise defense budgets, but in a slower pace.
If Trump wins a second term, he could push European nations to increase their defense budgets much more quickly than they had planned. This is especially true if the US withdraws its support for Ukraine.
The European Union, which is already struggling with high levels of debt from the post-pandemic recovery effort, will have to make difficult decisions about how to finance increased military spending.
UBS analyst warns that a Trump Presidency would accelerate dramatically the timeframe for increasing defense spending. While a Harris Presidency may give Europe some more flexibility to adapt, it will be much faster if Harris is elected.
Trump’s potential to decrease US involvement in NATO or Ukraine may leave Europe at risk and force nations to assume greater responsibility for defense.
European leaders are discussing strategic autonomy. However, without US support, security on the continent would be compromised, and nations may have to shift resources from other investments into defense.
China: What is it?
Both Harris and Trump have a strong stance against China, despite their differences in approach to Europe.
Both candidates will likely continue to work to limit China’s impact, especially in trade and technology.
It is a difficult situation for Europe which has been trying to keep strong trade relations with the US as well as China.
ASML, an Dutch manufacturer of semiconductor equipment, is experiencing headaches.
ASML was forced to export key products from China under pressure by the US.
The pressure will continue regardless of what the results are. Zach Meyers, of the Centre for European Reform, notes that Europe could soon be forced to decide whether it wants to align with US policy or face further trade restrictions from China.
Half of Europe’s GDP is linked to global trade. This makes the region highly vulnerable to any disruptions.
After the US elections, Europe will have to decide whether it wants to continue benefiting from US growth and maintain ties with China or choose sides in a global economy that is becoming increasingly polarized.
Which is the worse option for Europe: Subsidies or tariffs?
Tariffs are not the only concern for European manufacturers.
The US elections will have a major impact on domestic industrial policy, especially in terms of the future of subsidies for green energy.
Trump hinted that he would scrap Biden’s IRA green energy subsidies, which could cause uncertainty for European businesses operating in the US.
The IRA is criticized by Europeans for promoting unfair competition in green energy, but it also creates opportunities for European firms with a presence on the US market.
These opportunities will likely continue if Harris is successful, but under the same pressure of competition.
Businesses are most concerned about Trump’s unpredictable nature, as it could result in abrupt policy changes and damage to transatlantic investment.
This election could be a warning.
Some European analysts, however, argue that despite these worries the US elections could be a call to action for the EU in order to finally implement reforms.
Mario Draghi, former head of the European Central Bank (ECB), has emphasized that Europe must revitalize its economic growth and increase its competitiveness due to its declining size in comparison to the US.
A potential Trump presidency could provide the impetus for Europe to finally address its weaknesses.
Pro-European optimists claim that an intensified transatlantic relationship may encourage the region to implement the structural changes necessary for it to be competitive on the world stage.
The US elections may add uncertainty to a fragile European economy.
There are obvious risks: A second Trump administration could lead to trade wars and increase the cost of defense, as well as deepening geopolitical instabilities.
Even though a Harris Presidency would be less volatile than a Trump presidency, there are still challenges to overcome, especially in the areas of industrial policy and defence spending.
No matter who wins, it will have a lasting impact on the transatlantic relationship and economic prosperity of the region.
Trump’s victory may lead to higher tariffs and trade conflicts, which could ultimately hurt European exports.
The post What could the US election mean for Europe?s fragile economy can be updated as new information becomes available
This site is for entertainment only. Click here to read more
