Trump's threats on tariffs and questioning of America's future security role in Europe have drawn an energetic response, perhaps best symbolised by Germany's plans to spend hundreds of billions of euros on defence and infrastructure.
Yet while some analyst notes now include the phrase “Make Europe Great Again” - a play on Trump's MAGA slogan - the surge in optimism ignores Europe's unresolved problems: high energy costs, a fragmented internal market, and looming tariffs from its biggest customer, the United States.
Euro zone shares have risen 12% since Trump's inauguration on January 20, while U.S. stocks have fallen by 6.7%.
While that is still less than the 2% predicted for the United States, there was further positive news on Monday as closely watched factory gate data showed euro zone business growth expanding at its fastest pace in seven months.
Angelique Renkhoff-Muecke of Bavaria's metal and electrical industry association, was even blunter about the growing doubts over legal certainty for business in the U.S.
Trade risk
The European Central Bank estimates a 25% U.S. tariff on imports from Europe would dent euro zone output by about 0.3 percentage points in the first year. Retaliatory measures by Europe could increase the damage to about half a percentage point.
“Businesses are not in a good position to plan for their investments,“ said Atanas Kolev, co-author of one paper on the economic drag created by uncertainty.
Rheinmetall, Europe's top ammunition maker, expects significant sales growth in 2025, and missile maker MBDA will invest in its Italian unit to boost production in expectation of more orders.
Peter Huebner, president of Germany's construction industry association HDB and a board member of Strabag's German division, expected both orders and sales at his unit to rise this year.
HDB told Reuters it reckons sales will likely rise in 2025 for the first time in five years. In January, it saw sales declining by 1.4% this year.
“Money alone won’t do the trick,“ said Stefan Rauber, CEO of German steelmaker Saarstahl.
“Stability and rule of law is all good and people probably appreciate it more than in the past now that others have become erratic,“ he said. “But of course it is also a bit of a drag because ... we could move a little faster on some fronts.”
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