3 ways the U.S. election could change the future of Europe

Election Day in the United States is quickly approaching, and the presidential contenders, Donald Trump and Kamala Harris, are locked in what promises to be a close contest. 

The outcome of the election is vital to America's and the rest of the world's futures, possibly more so in Europe.

Former President of the European Central Bank (ECB), 'Mario Draghi.'

Simon Wohlfahrt/Bloomberg via Getty Images

The old continent has grown to rely largely on the United States for trade and defense assurances, raising the stakes for the area as it deals with economic instability, declining competitiveness, the development of right-wing nationalism, and increased security dangers as a result of Russia's invasion of Ukraine.

Consider Trump, for instance. He has made no secret of his desire to raise the cost of European commerce, fueling fears in the stock market that the area would lose out. Harris's actions might put further pressure on Europe to distance itself from China. 

Fortune chatted with top experts ahead of the election to get their perspective on the likely impact on Europe.

1. Crippling tariffs

The United States is the EU's greatest trading partner. Over time, the nations have built a massive commercial connection that employs 16 million people on both sides of the Atlantic and generates trillions of dollars in trade and investment. That isn't all: commerce accounts for half of Europe's production, which is suddenly exposed.

Trump, the Republican nominee, intends to levy an extra 10%-20% in cross-border taxes, raising trade costs and perhaps weakening the euro.      

"Tariffs will seriously dampen the EU's economic growth," Zach Meyers, assistant director at the Centre for European Reform, told Fortune. 

This is not an unlikely conclusion, considering that Trump imposed taxes on steel and aluminum imports from the area during his first term as president. More tariffs might harm economies such as Germany, which has been suffering and is highly reliant on US exports, causing GDP to fall by 0.23%, according to research.

"The prospect for retaliatory measures regarding the $350bn+ of US exports to Europe means households and businesses would be faced with higher prices, which would eat into consumer spending power and hurt corporate profits in Europe," according to James Knightley, ING's senior international economist. 

Brussels is already preparing for how the election and a tough tariff regime will play out. 

However, if Europe is granted an exemption from Trump's tariff policy, Meyers believes it will increase European businesses' relative competitiveness in the United States. 

Trump's strategy is based on tariffs. Harris, on the other hand, would adopt a more diplomatic approach, putting further pressure on the EU to reconsider its economic connections with Beijing. After all, the United States has already used its diplomatic muscle to persuade Europe, including breaking relations with Chinese telecom giant Huawei. 

Meyers anticipates the three-way interaction between the United States, China, and Europe to become more problematic. Harris would urge European corporations to manufacture more items in the United States, following the lead of her predecessor, President Joe Biden. 

Both Trump and Harris are likely to raise tariffs on China, pushing the Asian powerhouse to dump more products on Europe (than it already does) and raising the likelihood of a full-fledged trade war, according to Meyers. 

2. Business uncertainty

While tariffs are one method to put "America first," as Trump claims, the election might just mark the start of a worldwide shift in mood music. 

"There is concern that President Trump could bring significant change to both the economic and geopolitical environment," Knightley told reporters. "Harris is effectively the continuity candidate and as such is viewed as less threatening."

Europe's lagging competitiveness in technology, innovation, and defense has become a "existential challenge," according to former European Central Bank President Mario Draghi.

"There are growing worries that the EU also needs a stronger role in AI to avoid a new set of future dependencies," according to Meyers. Meyers thinks that integrating US and EU IT rules might benefit both nations by increasing productivity and commerce in tech services. 

While Europe strives to improve its status in the fast-paced and competitive world of innovation, it has also earned a bad reputation for investigating US Big Tech companies' online safety and antitrust policies. 

Trump recently railed about the EU's multibillion-dollar penalties against Apple, pledging to take action if he wins the election. He has also previously criticized European legislation.

There is a lot of uncertainty—and curiosity—about what each contender would signify for Europe's ability to innovate and govern. However, the area remains mainly accountable for changing its fate on this issue. 

"It is ultimately up to European politicians to establish an environment that allows them to expand and scale up to compete with the main U.S. players. Unfortunately, I do not believe that will happen," Knightley remarked. 

3. Defense

Geopolitics is another significant area where the two candidates' opposing viewpoints might have an influence on Europe. Years of weak military funding, along with the rising Russia-Ukraine conflict, have left the EU in need of US assistance. 

In that context, "the Trump effect on Europe and the EU will be negative—more negative than it would be under the Harris administration," said Steven Blockmans, an associate senior research scholar at the Centre for European Policy Studies, to Fortune.

Trump has previously threatened to abandon NATO. He even went so far as to declare that he would "encourage" Russia to "do whatever the hell they want" to NATO members who do not contribute to the alliance, Politico reported earlier this year. If Trump decides to modify his stance on Ukraine, European countries will immediately raise defense spending to strengthen national security.

Harris has stated that, if elected, she will support the military alliance and Ukraine. She is likely to mostly follow Biden's international relations strategy, with a few adjustments of her own.

The key concern about a second Trump administration, according to Blockmans, is whether "it will still be adults in the room" when making policy choices. 

Another risk of a Trump 2.0 is that his dominance may inspire other far-right European politicians, such as Hungary's Viktor Orbán. 

"There are very strong streaks of autocracy in Trump's approach," Blockmans said, cautioning that other variables, in addition to the impact from across the Atlantic, influence the popularity of Europe's political leaders. 

"In 2024-25, Europe and the EU's [are] unfortunately in a more dependent situation in transatlantic relations, and that is why it matters even more that there is stability, predictability, and support."