The “Lesser Evil” Dilemma
With less than two weeks before US voters head to the polls, European policymakers are increasingly anxious about the economic consequences of either outcome.
A potential return of Donald Trump to the White House is particularly concerning, as his campaign has pledged to impose sweeping tariffs—up to 60% on Chinese goods and possibly 20% on all other imports. Such measures could trigger a trade shock that would dwarf his previous policies, severely impacting Europe’s already fragile economy.
The timing for these potential tariffs is far from ideal. Unlike Trump's first term in 2017, when the eurozone experienced its strongest growth in a decade, Europe now faces significant challenges. Germany is enduring its second consecutive year of economic contraction, while France is enacting EUR 60bn in spending cuts and tax increases. With business confidence plummeting, the European Central Bank has accelerated plans to cut interest rates. Economists warn that even a modest 10% tariff could reduce eurozone exports to the US by a third, cutting output by 1.5% over three years, comparable to the impact of the recent energy crisis.
Europe’s vulnerability lies in its heavy reliance on trade, which accounts for half of its economic output, compared to just a quarter in the US. With 30 million manufacturing jobs at stake, the region is particularly exposed to any restrictions on global commerce. Complicating matters further, both US candidates share a bipartisan consensus on tougher measures against China, threatening key European industries such as microchip manufacturing. Additionally, both Trump and Harris are expected to press Europe to take on more of NATO’s security costs.
The situation is further complicated by Europe's limited capacity to respond to economic shocks. Following pandemic-related spending and the energy crisis, key nations like France carry substantially higher debt loads than during Trump's first term, constraining their ability to provide fiscal support if needed.
European nations face what many view as a “lesser evil” scenario in the upcoming US presidential election, where both potential outcomes present distinct challenges for the continent's economic stability. A Harris presidency promises continuity, maintaining Biden's established policies including Chinese trade restrictions—a path that, while not ideal, offers predictability for European markets and policymakers. In contrast, a second Trump term threatens more severe economic disruption through proposed sweeping tariffs and creates heightened uncertainty around crucial issues like Ukraine support. While Harris's approach might preserve current challenges, Trump's presidency poses risks that could fundamentally reshape Europe's economic and geopolitical landscape, leaving the continent to navigate an increasingly unpredictable future.
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