How Trump's trade war is creating unexpected opportunities for Europe

Trump’s trade war damages global economy, yet boosts Europe’s influence.

The trade war unleashed by US President Donald Trump has sent shockwaves through the global economy, leaving many Europeans worried about slowing growth and rising costs. Yet amid the disruption, some politicians and economists in Europe see a silver lining: a historic opportunity to strengthen the eurozone’s global position and tilt the balance of economic power back toward Europe, Politico reported.

By setting off a tariff war with China — and increasingly with other trading partners — Trump has inadvertently opened a window for the European Union to reposition itself as a stable and attractive alternative in the global economic race.

Europe’s struggle and the unexpected boost

Europe’s economic recovery from the Covid-19 pandemic was already fragile, with growth averaging just half that of the United States. Germany, the bloc’s industrial powerhouse, faced severe setbacks as its factories struggled with energy price shocks following Russia’s invasion of Ukraine. Meanwhile, the EU’s vaunted single market remained fragmented in practice, and its policy mechanisms were often slow and unwieldy.

But Trump’s aggressive new tariff package, dubbed “Liberation Day,” which introduced duties of up to 49 percent on imports from almost every country, has begun shifting dynamics. The euro has strengthened by nearly 10 percent against the dollar this year, and European government bonds — long seen as safe investments — are attracting inflows at the expense of US Treasuries.

Davide Oneglia, director of European and global macro at TS Lombard, pointed out that the dollar’s weakening position is providing fresh momentum for the euro to gain acceptance on the international stage. "The euro has gotten a new push," he said.

Adding to the optimism, the International Monetary Fund slashed the US growth forecast for 2025 by 0.9 percentage points due to the tariff fallout, while downgrading the eurozone's forecast by a relatively mild 0.2 percentage points.

Opportunities amid chaos

European Commission President Ursula von der Leyen has been advocating a sharper focus on competitiveness since the start of her second term, and the global turmoil is giving her agenda new relevance. As the US and China impose tariffs exceeding 100 percent on each other’s goods, Europe finds itself uniquely positioned to supply global markets.

According to Ludovic Suttor-Sorel, head of the European Macro Policy Network, prolonged US-China trade tensions could open new sales markets for European companies, particularly in sectors such as chemicals, transport equipment, and machinery. American buyers, previously reliant on Chinese suppliers, may increasingly turn to Europe for industrial goods.

Moreover, Europe could emerge as a beacon of free trade at a time when the US retreats into protectionism. As von der Leyen remarked to Politico, "countries are lining up to work with us" in an increasingly unpredictable global environment.

The euro's moment?

One of the subtler yet potentially transformative effects of Trump’s trade war is the threat it poses to the US dollar’s status as the world’s dominant currency. Investors have traditionally turned to the dollar as a safe haven during times of uncertainty, but the recent upheaval has raised doubts.

Deutsche Bank’s Chief Economist David Folkerts-Landau described the Trump tariffs as the "largest shock to the world’s financial and trading system" since the end of the gold standard in 1971. While few expect the euro to overtake the dollar entirely, its appeal as a stable, rule-of-law-backed currency could grow significantly.

As economist Nicolas Véron of Bruegel pointed out, "If trust in the dollar collapses, where do people go? The euro is front and centre."

European Central Bank President Christine Lagarde has urged EU leaders to seize this moment by pushing forward financial market reforms that could make the bloc a more attractive destination for global capital. Success could mean lower borrowing costs for European businesses and more leverage for Europe in geopolitical affairs.

Risks and realities

Despite the opportunities, the risks are real. Tariffs will undoubtedly weigh on European exports, and if the global economy slips into a deeper recession, traditional patterns could reassert themselves — with investors flocking back to US assets despite the turmoil.

Moreover, Brussels must navigate carefully. US pressure to align more closely with Washington against China could complicate Europe’s attempts to capitalize on new trade opportunities. Any substantial strengthening of the euro could also hurt European exports, particularly for struggling economies like Germany’s.

Still, compared to just a year ago, when Europe's economic prospects seemed almost uniformly bleak, the competition now looks less one-sided. As political observers note, in global trade — as in football — sometimes the best opportunities come when your rivals score an own goal.