European Economy: A Delicate Phase Between New Strategic Priorities and a Trade War to Avoid

Translated by Valeria D’Alessandro

Changes in international relations in recent years have deeply affected the structures consolidated after World War II, creating a break with the past that appears increasingly irreversible.

This phase of transformation, initiated by the conflict in Ukraine, has been further accelerated by the beginning of Trump’s second presidency, which –since its early months—has clearly diverged from the policies of previous U.S. administrations.

The attempt to reach an agreement that could bring an end to the Ukrainian conflict—along with the long-term consequences such a decision may entail—and the openly strained relations with historic European allies have rapidly altered global power dynamics. Faced with this new reality, Europe is working to define a bold and forward-looking strategy for the future, known as Readiness 2030.

The main aim is to be prepared to face the challenges posed by the current international landscape, providing an unprecedent economic effort to strengthen strategic and military infrastructure.

A significant shift in paradigm has led to the reconsideration of some of the most long-standing taboos at the European level. Notably, the issuance of common debt—previously unthinkable outside of the COVID-19 response measures—has now become a reality, along with the decoupling of such expenditures from the Stability and Growth Pact. These developments, together with a forthcoming reallocation of EU funds and the potential expansion of European Investment Bank (EIB) grants in a new version of the Juncker Plan (EFSI[1]), aim to profoundly reshape spending priorities at both national and EU levels[2].

New strategic requirements were introduced, and in addition, Trump’s widely publicized retaliatory measures against trade imbalances with third parties—namely, tariffs—were also implemented.

The threat finally became real, and with an hint of surprise, it is set to affect not only America’s adversaries, such as China, though the imposition of 20% tariffs.[3]

This remains an ongoing situation, particularly due to the potential political impact. At both the trade and community level, responses should be unified, target, and carry significant economic weight—starting with the imposition of reciprocal tariffs, which could potentially spark a trade war.

Furthermore, factories most affected by the tariffs will need to be supported through tailor-made economic measures, while also preventing a dangerous outflow of capital from the Old Continent to the U.S. And we must not overlook the potential inflationary effects, especially one of the most unstable and turbulent periods of recent decades.

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