Brussels Economic Monitor 4/2025: Diverging allies face stormy waters
Current facts and figures of the European Union visualized
Lesedauer: 2 Minuten
4/2025: Diverging allies face stormy waters
Europe’s dilemma one year after Trump’s re-election
One year after Trump’s second election victory, Europe is facing a harsher version of "America First". This time, transatlantic relations are defined as much by aggressive action as by confrontational rhetoric. The US doubles down on economic protectionism, industrial nationalism, and the weaponisation of trade and regulation.
Brussels reacts with caution and pragmatism trying to strike the right balance between appeasement and confrontation. The result: a strategic polarization between allies who still share values but increasingly diverge on interests in times of growing geo-economic tensions.
Measures of uncertainty
Indices based on media attention to types of uncertainty
Key topics covered in the Brussels Economic Monitor 4/2025:
- Uncertainty measures have receded from their peaks
- Tariffs have ended up lower than feared on April 2nd
- The US-dollar has merely returned to its 2024 level
- Intra-EU trade is far larger than external trade with the US
- The US alone cannot match China in key metrics
Take
In recent years, trade with the US has been a rare bright spot for European companies who have been struggling with high energy costs and mounting competition from heavily subsidised Chinese companies. Consequently, when Donald Trump returned to the White House and began implementing his strict tariff policy agenda, Europe had little appetite for a prolonged trade confrontation with the US Yet even if the resulting arrangement is asymmetrical, it left EU exporters in a relatively solid - if fragile - position, enjoying lower effective tariff rates than most other major exporting countries.
However, the longer-term challenge may lie elsewhere. The Sino-US trade war and China’s subsequent weaponisation of its dominance in rare earths production and refining could ultimately prove more damaging to Europe. These dynamics risk undermining Europe’s efforts to rebuild its defence capabilities, sustain support for Ukraine, and expand manufacturing capacity in key strategic technologies.
A more confrontational stance from the US is only one aspect of a global environment that is becoming less predictable and less favourable to Europe’s ability to translate economic strength into geopolitical influence. To regain genuine strategic autonomy, the EU will require a Draghi-style industrial policy drive – one that actively manages critical dependencies and builds supply chains resilient to the whims of external powers.