Europe Faces Economic Storm Clouds from Multiple Fronts

Europe faces economic threats from multiple fronts high energy prices due to the Ukraine war, impending competition from subsidized Chinese exports, and potential new tariffs under a Trump presidency.

These shocks arrive as Europe already struggles with low growth, declining productivity, high inflation, and fiscal tightening. Its economy is especially vulnerable due to heavy reliance on external trade.

Chinese manufacturing is expanding into higher-value, high-tech sectors like EVs, challenging European industries. Europe also risks becoming dependent on China for critical green energy technology.

Tit-for-tat trade disputes between Europe and China have already begun over issues like EV subsidies and could further raise costs.

With limited fiscal room, Europe will struggle to stimulate growth or ease the transition of workers across sectors. Lobbying against reform is fierce, risking greater inefficiency and fragmentation.