A year has passed since Donald Trump assumed the office of U.S. President for the second time. He promised a new golden age for the American economy. But it has proven far from straightforward: instead, there have been turbulent developments, particularly in tariff policy, with consumers facing continued price increases and widespread dissatisfaction. Nevertheless, the U.S. economy has held up considerably better than feared in spring 2025. As in previous years, it likely grew more strongly in 2025 than the eurozone economy.
However, some puzzling U.S. economic data raise questions. The solid growth of the U.S. economy in 2025 stands in contrast to the few newly created jobs and rising unemployment. Some observers argue that the United States is benefiting far more from the AI boom than Europe and is therefore already experiencing significant productivity gains without concurrent job growth. This is not inconceivable. After all, the U.S. economy has already benefited more from PCs, the internet, and related business models for over 20 years. In the official data for 2025, however, the AI boom is primarily reflected in high investment in data centers. While there are initial clear indications of productivity-enhancing effects in the workplace, a genuine productivity boom is not yet guaranteed. Should such a boom materialize, a growth gap between the United States and Europe—possibly even widening—can be expected in the future as well.
At present, solid economic growth can also be explained by special factors, such as a temporary capital-intensive AI investment boom and free-spending high-income households. The less dynamic labor market can be attributed to Trump’s restrictive immigration policy. Significantly lower immigration—or increased deportations—coincides with lower population growth, which in turn leads to fewer new jobs. Whereas a few years ago one could assume that well over 100,000 new jobs per month were needed to offset population growth and keep the labor market in balance, the rough estimate now stands at around 50,000. The low momentum in job growth is thus a kind of new normal and not primarily attributable to a weaker labor market. Signs of slight cooling in the labor market are nevertheless evident—for instance, in the form of somewhat higher unemployment.
The weaker immigration will undoubtedly dampen structural growth in the US economy. Since reliable data on immigration under the new policy are currently lacking, one can only roughly estimate that annual US economic growth could structurally be 0.2 to 0.4 percentage points lower. It therefore seems plausible that Europe’s existing growth gap relative to the United States could narrow, at least for the time being, provided Europe does not fall behind in the race for innovation in new technologies.
In any case, the claims about Europe’s economic decline are frequently exaggerated. The European growth gap—since the turn of the millennium, economic output growth in the eurozone has averaged about one percentage point lower than in the United States—has so far been partly attributable to lower population growth. The United States population has grown roughly twice as fast as the eurozone since the turn of the millennium, and more than three times as fast as the European Union. Nevertheless, Europe undoubtedly faces major challenges. More innovation and more efficient bureaucracy are particularly important, especially against the backdrop of an aging population, geopolitical uncertainty with higher defense spending, and the major challenges of climate change. But Europe can tackle these issues from a better position than is often feared. Europe’s growth deficit relative to the United States could narrow as American population growth slows. And ultimately, Europe has the power to close even the remaining gap through forward-looking policy.
Kommentar verfassen