The Great American Revival: Is it Europe's Biggest Threat of Decline?

Key Takeaways

• The Great American Revival is Europe's most significant challenge, as America experiences an industrial resurgence while Europe faces stagnation and fragmentation.

• The US's resurgence is marked by strategic protectionism, industrial investment, and tech-driven policies that could isolate Europe economically and geopolitically.

• Europe's declining industrial base and fragmented response to global shifts have left it vulnerable to America's growing influence and protectionist measures, including tariffs.

• Tariffs and trade wars could harm European economies, particularly in high-value sectors like automotive and machinery, with the potential for further economic fragmentation within the EU.

• The brain drain to the US, especially in AI, defense, and tech, is exacerbating Europe's inability to compete globally, as American venture capital and policy create a more attractive environment for innovation.

• The NATO alliance is weakening as the US reorients its focus towards China and the Asia-Pacific, putting Europe at risk of losing strategic security and economic support.

• To counter this, Europe must revamp its industrial strategy, reduce regulatory barriers, and invest in sovereign industries like energy, semiconductors, and manufacturing to regain competitive autonomy and form new global alliances.

As I look ahead to 2025 and beyond, the Great American Revival presents itself as Europe’s biggest existential challenge. Whilst the USA is experience a resurgence of industrial exceptionalisms and dynamism, Europe is the ‘sick man of the liberal world’. It is being forced to come to terms with sluggish productivity growth, over indebtedness, a dying industrial sector and a shifting balance of power that can no longer be resolved by over-regulation or it’s transatlantic partnerships. Meanwhile. the US Industrial Revival is not only redirecting investments, supply chain and market dynamics inwards, but creating a clear shift in geopolitical focus as it pursues a techno-economic war with China. As a result, Europe is at risk of finding itself more isolated, with dwindling economic influence unless it is willing to come to terms, and challenge its own economic autonomy and resilience under a new economic era where competitiveness and influence is defined by manufacturing power and technological resilience.

The Great American Revival presents an opportunity for Europe to reduce it’s political and economic fragmentation, but it must do so quickly. Europe must confront the harsh realities of declining industrial production and competitiveness to not only accelerate it’s own industrial transformation, but re-evaluate how it envisions it’s economic sovereignty. Otherwise, the Great American Revival will be the start of the Great European Decline.

The American Resurgence and European Competitive Erosion

The renaissance of American Dynamism is synonymous to the ‘Great Awakening’- an economic and cultural revival marking a calculated pivot in US policy combining aggressive industrial investment, innovation, strategic protectionism, and Silicon Valley. Moreso, the last decade has marked a pivotal shift in the global economic landscape; one that is now defined by a stark contrast between America, China, Russia and Europe’s waning competitiveness.

Under the banner of ‘Making America Great Again’, American political and economic elites have been able to ignite an economic revolution that has gone far beyond the bonds of Washington. At the core, it is making strategic sectors mission-oriented, and thus, erasing the traditional boundaries between government and private sector; procurement and private financing; national security and economic prosperity. Nowhere is this appeal to Big Tech and Silicon Valley clearer than the appointment of veterans such as Elon Musk and David Sachs, amongst other Silicon Valley veterans- that are solving a problem-opportunity nexus and pitching a solution: winning as the only requirement. This has fueled a uniquely American cultural dynamism- a banner under which industry, tech startups, entrepreneurs and business owners can rally.

As such, the last decade has seen the United States leverage a series of landmark policies to enshrine this vision and reignite it’s industrial base and prowess, refusing to acknowledge that it is also falling behind China and other BRIC countries in areas such as semiconductors, raw materials and energy. This state of denial by America to concede to the realities of it’s weak industrial base, services-driven economy, import-dependence, and fiscal issues is what sets the United States apart from Europe, and any other country in the world.

By contrast, Europe’s performance and narrative tells a different story. It is one of increased fragmentation, isolationism and reactivity to a dismal decade of productivity loss and growing economic and social unease. There is no common banner under which Europe is rallying, it is struggling to envision future prosperity. The Ukrainian war has been deployed as a narrative to spur industrial production and defense spending, but it’s efficacy applies only to a minority of European leaders, investors and innovators. Whilst America views national security as an avenue for future prosperity, Europe is eroding under fear and uncertainty, accepting it’s fate as a dwindling economic power and navigating under the shadows of a no longer benevolent big-brother. The biggest irony, is that if perhaps Europe had proudly maintained it’s traditional industrial structures over the last two decades, and not sought to mimic the United States and Silicon Valley, it would have been in better shape to navigate and shape today’s challenging geopolitical and economic environment.

Of Exports and Tariffs: The American Protectionist Edge

The Great American Revival has signaled a new era of strategic protectionism for the United States, one of which will greatly affect the EU. Nearly one quarter of European exports are dependent on the United States, with 89% of these compromised of high value-add goods amongst industries such as machinery, automotive, vehicles and chemicals manufacturing. Put simply, the United States is Europe’s largest trade partner in export goods that form the cornerstone of European manufacturing, and a new era of American protectionism will have dire consequences for Europe.

The ascendance of Donald Trump to a new Presidency, coupled with the possibility of imposing future tariffs ranging from 10%-20% raises fundamental challenges for Europe, and lays bare it’s flaws.

Under his previous Presidency, Trump had already imposed a 25% tariff on European steel exports, and 10% on aluminum, leading to a dispute which saw Europe impose re-balancing tariffs to the tune of €2.8 billion and retaliate against bourbon, whisky, Harley Davidson and power boats industry. In 2021, a trade-detente was reached under the Biden Administration, avoiding a retaliatory trade war. The scenario today is glaringly different.

Firstly, the overall economic ramifications of tariffs on the broader European economy would be cancerous, leading to a direct estimated GDP decline of 0.3%1. Export industries, specifically in machinery, electronic and optical products, automotive, energy and technological goods would be disproportionally affected, resulting in a negative supply shock to an already reeling European economy, and wipe out a further 1%-2% of earnings per share. Germany, Italy, Ireland and France would be most likely to be severely affected, with the United States representing from a quarter to nearly half of all their supra-Euro exports2.