Europe will not replace economic power soon

Welcome to your return. Two themes are designed by market morale now. First, Donald Trump’s political agenda is exposed to American economic, financial and institutional superiority. Second, relative stability and political developments improve expectations in Europe.

This reflects this, in March, the Scan of the Bank of America’s Fund Manager showed that the most rotated from American stocks and to registered European stocks.

One of the theories that are now presented as a result of these trends is whether the long -term economic growth feature in America on the continent has also entered Twilight. On all that I have recently Our landing and Saudi Arabia Analysis, I think this idea is exaggerated. Here is the reason that Europe will not take the economic cloak of America any time soon.

First, when it comes to basic growth rates, the size of the US leadership on Europe is important.

FITCH reviews have calculated that over the past 5 to 10 years, the average annual growth rate of the supply side in America – the capital in capital, employment and technology – has reached about 2.5 percent. In the euro area, it was closer to 1 percent. This is before assessing the impact of politics decisions on both sides of the Atlantic Ocean this year.

Trump’s agenda will curl productivity for us. Definitions will define shortcomings. Understanding will invest capital, research and development. Constipation on immigration and the drain of brains that are likely to weaken work supplies.

However, the damage caused by the president should be unusual always Andrew Kiningham, chief economist in Europe in capital economics, says, says

“The United States has a larger and more uniform internal market, an ecosystem for the most powerful investment capital, global -level universities and lighter touch regulation.”

In fact, in terms of total inputs, the European Union has a advantage in workers, and the United States has progress in financial and financial capital. But the American growth feature It is largely emitted From the “productivity of the upper total factors”, or the extent of its inputs.

In Europe, growth can be increased from capital flows if the continent investors see as an alternative safe haven. But the effect may be limited, not the least of which is investment opportunities.

“Whether rotation in European origins can continue to be doubtful. Trump’s madness can accelerate the decline of the dollar as a reserve currency, but the wide capital markets of the United States means that it will be slow,” says Keningham.

Therefore, can Trump greatly – and permanently – this feature of economic dynamics? This depends on how one expects the remainder of his second term.

There are checks on management. The president has already reduced his most extreme introductory plans and attacks on the independence of the American Federal Reserve, amid a high term in the long term.

The broader political pressure will increase. Inflation has increased in the year and unemployment. The confidence of the Republican consumer, which tends to track approval categories when Trump is in power, is a plateau.

impact existing Duties, especially in China, will pass soon. “It is possible that the prices and deficiency of stores will be felt from mid -June,” says Paul Donovan, the UBS Global Wealth Manegement, said. “This will weaken feelings between more Republican voters.”

In the next 12 months, the market expectation for the effective tariff for the United States will eventually be between 10 and 20 percent painful – from 20 percent now. Commercial activity will be strengthened due to constant uncertainty. Wall Street now sees approximately 50-50 chances of stagnation.

The Republican Party has a gentle majority in the House of Representatives and the Senate. “Often, the middle of the period makes the secondary president a lame duck. But with the high prices and unemployment that you likely feel at that time, the vote may be particularly bad for Republicans,” Matt Jerkin, the chief strategy in BCA Research.

This does not prevent great damage to the American economic growth path. Trump may tend to his executive powers more. Strategists highlight the political dangers highlighting four main threats: undermining federal reserve independence, destroying the treasury market, capital controls, and giving legitimacy to a third state in one way or another (which will enable the continuous damage of politics).

Each of them can greatly weaken the American economy, and its ability to direct the inputs mix over time.

But most experts believe that all of these – with the exception of the threats to the Federal Reserve – are low probability events, given the financial market and political and legal obstacles. Even if Trump replaces the President of the Federal Reserve, Jay Powell, the president of a more wonderful central bank, Cedric Chihab, the chief economist in the BMI, is noted that the members of the Federal Reserve Board and the required approval of any new chair by Congress will reduce the risk of a major deviation in the monetary policy approach.

In general, Capital Economics do not expect possible growth rates in the United States or the euro region in particular from the historical Fitch’s historical estimates in the long run after Trump.

This assumes that the customs tariff settles 10 percent over the rest of the world and 60 percent of China in his term, and that the president’s commercial and migration policies are not binding after leaving his position. It also reflects the greater benefits of artificial intelligence that accumulates on the United States for Europe. (The efforts to cancel the regulatory restrictions, such as the micro -planning rules under Trump, will also be supportive.)

How possible is this? Looking at the path of economic emotions (and the negative effects of income compensation for import duties with tax cuts, as I evaluated in April 6 EditionIt is possible that it will be a victory in the non -Maga presidential elections in 2028 (albeit not guaranteed).

Half a century of last survey data indicates that the party’s strength tends to change hands when voters feel much worse at the end of the president’s period more than they did at first. With the exception of climbing a more prominent tariff, this seems reasonable during the Trump era.

In this case, much of his agenda can be inappropriate. The uncertainty will raise. Commercial investment will pick up. The capital may decline to America.

Although the import fees may be sticky, the economic price of the high tariff wall is likely to undermine the duties’ state of duties over time (as it was analyzed in March 30 newsletter).

This does not mean that the American economy will return to its original growth rate immediately after Trump. The reputable permanent damage is possible (especially if it is the Maga policy). Not all policies can be reversed. But the strike to the basic growth rate of the United States will not be as strong as expected.

What about Europe’s ability to catch up with knees? “It is difficult to overcome slow structural factors-such as poor population growth,” says Charles Seville, the first director of Fitch Ratsings. “This puts the responsibility of investment, productivity growth, and active labor market policies.”

The recent transformations in the economic policy of the European Union are real, but it should not be exaggerated. Germany’s defense and infrastructure incentive will enhance growth in the largest economy in the European Union, but capital expenses at the region level are also required. Pushing the broader infiltration of the mass may increase demand rather than raising the growth of trend productivity, especially if less spectacular technology is spent.

Lorenzo Codonio, the former chief economist in the Italian Treasury, notes that the implementation of Mario Drajhi’s plan to raise European productivity – from expediting the capitalist efforts and the financial federation to align the Red Ribbon – will face obstacles, and Lorenzo Kodonio, the former chief economist in the Italian Treasury Department. “The reform process is gradual in normal times. Negotiating with 27 countries is still battle.”

The growth expectations in Europe in the short term through Trump’s agenda, as the United States exports uncertainty and commercial disruption. This risk the political recovery of the reform efforts as well.

All this indicates that the continent will not be able to achieve large ways to the advantage of the United States growth, especially with the time when the president’s period ends.

Therefore, in the collaboration of the current economic introduction to America, and Trump’s ability to cause it to be destroyed and European reform efforts, it is difficult to imagine the advantage of growth in the United States to threaten Europe in the medium term.

This may seem intuitive given the current news flow. But the bias of modernity is common when watching the markets. The clear risks include the inability to predict Trump and 2028 elections.

However, my foundation is the exceptional economic in the emergence of Trump 2.0, perhaps with the permanent damage to the reputation, as investors take a more diverse approach to safe havens and backup currencies. The European Union may seem more promising. However, the delta between America and Europe has changed the rates of trend growth in Europe.

Where are your assumptions differ? Let me know: [email protected] Or on x @Teapperikh90.

Food to think

How many governments should be spent to reduce existential threats from artificial intelligence? This paper Are mathematics.