A recession is almost guaranteed for Europe after Trump returns to the White House

Trump’s back in the White House, and European leaders are anything but thrilled. He beat Kamala Harris, leaving EU officials with a lingering sense of dread.

After watching him disrupt international relations and slap tariffs on European goods in his first term, they know what to expect: more economic warfare. They’ve been planning for this for over a year, but now that it’s real, they’re scrambling.

EU leaders scurry to shield Europe from tariffs

The day after the election results, European diplomats and leaders woke up with a shared anxiety. “I am seeing it, [and] not wanting to believe,” one anonymous EU official said. Another diplomat added, “It is not great, again.” But there was no shock this time, just reluctant acceptance.

They’ve seen Trump’s playbook before, and they know it won’t be kind to Europe. The United States and the EU share the world’s largest bilateral trade relationship. In 2021, their trade and investment exchange topped 1.2 trillion euros ($1.29 trillion), a very important economic connection for Europe.

But Trump’s “America First” stance has always pushed for more American goods in European markets, and he’s ready to make the EU “pay a big price” for not stepping up. He’s proposed a fresh 10% tariff on European imports, which would hammer industries across the continent.

For Germany, this is a serious threat. German automakers rely heavily on exports to the U.S., and Trump’s tariffs could devastate an already fragile industry. In a recent report, ING analysts called Trump’s win Europe’s “worst economic nightmare.”

“A looming new trade war could push the euro zone economy from sluggish growth into a full-blown recession,” they said. Economic growth across the EU is already slow, and adding new trade barriers would be catastrophic.

European leaders aren’t waiting for things to unravel. They’re meeting Thursday and Friday in Budapest to hash out their response. President of the European Commission Ursula von der Leyen, French President Emmanuel Macron, Spanish Prime Minister Pedro Sanchez, and Italian Prime Minister Giorgia Meloni are all expected to attend.

For most, this isn’t a celebration, but an urgent planning session. The mood in Brussels is tense, as leaders focus on keeping the EU economy stable. Hungary’s Prime Minister Viktor Orban is the outlier, though. A long-time Trump fan, Orban hinted he’d be popping open champagne to celebrate. But for the rest of Europe, it’s damage control time.

“There will be a first discussion [on the outcome of the U.S. election] in Budapest,” a third EU source confirmed. They’ll talk trade, but Trump’s comeback raises another big issue for Europe: security.

Ukraine in limbo, NATO’s future in question

One of Trump’s biggest promises during the election was to cut U.S. military aid to Ukraine, and this has European capitals on edge. Without American support, Ukraine’s position against Russian aggression would weaken significantly.

European officials know they don’t have the resources to replace the billions in military aid Ukraine currently gets from the U.S. Losing that support could push Ukraine into a disadvantageous peace settlement with Russia—a win for Putin and a nightmare for Europe.

French President Emmanuel Macron and German Chancellor Olaf Scholz are preparing to make a stand, calling for “a more united, stronger, more sovereign Europe.” They’re doubling down on a shared defense strategy and pushing NATO to reinforce European security.

The stakes are high, and NATO leaders know it. The alliance, long a key piece of Europe’s defense, depends heavily on American involvement, and Trump’s return has revived fears of a fractured NATO.

NATO Secretary-General Mark Rutte, who previously served as Dutch prime minister, said he was ready to work with Trump, but he didn’t hide the alliance’s concerns. “NATO helps advance U.S. interests, multiplies American power, and keeps Americans safe,” he reminded Trump, subtly signaling that NATO isn’t just a European security blanket.

Germany’s transatlantic coordinator, Michael Link, shares these concerns, warning that Europe can’t sit back and wait for Trump’s next move. “We have to make clear what we expect of the U.S., that it must fulfill its NATO obligations,” Link said on German radio. The big fear here is a disengaged America, with  a more aggressive Russia and an emboldened China.

EU faces tough choices

“Our big focus is to keep the European unity,” said a third diplomat who spoke about the upcoming EU discussions. ING analysts put it bluntly: the combination of tariffs and dwindling U.S. military support for Ukraine is Europe’s worst-case scenario.

German Finance Minister Christian Lindner spoke out last month, saying that if the U.S. goes down this path, Europe would have to “consider retaliation.”

Trump’s proposed blanket tariffs could slam German automakers like Volkswagen and BMW, dealing a huge blow to a sector that’s already struggling.

Lindner emphasized the need for diplomacy, urging EU leaders to work together to prevent a U.S.-EU trade conflict. “It’s not in the best interest of the U.S. to have a trade conflict with [the] European Union,” he argued.

And then there’s the question of tech. Europe has already started passing new regulations targeting American tech giants, which will likely inflame Trump’s administration. European leaders know they need to tread carefully here; adding fuel to an already tense trade environment could tip the scales toward an outright trade war.

Diplomatic balancing act: A tightrope walk

While some leaders, like Macron, are trying to keep a diplomatic front, the atmosphere among European officials is grim.

Macron has already signaled he’s willing to work with Trump, saying, “Ready to work together as we have done for four years.”

But he and Scholz also know that Europe needs to be stronger than ever if they’re going to keep up with the U.S. under Trump.

The EU is pushing to make its voice heard, but in the end, Europe is heading into a new economic reality, one marked by tension, instability, and a whole lot of unknowns.

The EU’s unity, economy, and very sovereignty are on the line. Trump’s back, and this time, Europe is feeling the squeeze harder than ever.