US growth set to outpace europe as trump returns to the white house
The United States economy is expected to surge ahead of Europe’s, growing at nearly double the pace of the eurozone over the next two years, according to forecasts from the World Bank. This stark divide in economic performance is poised to widen as Donald Trump’s return to the White House bolsters the world’s largest economy.
US growth outstripping the eurozone
The world bank’s latest projections reveal a significant gap between the US and eurozone economies. While US growth is forecast to slow slightly from 2.8% in 2024 to 2.3% this year and 2.0% in 2026, these figures still dwarf the eurozone’s predicted growth of just 1% in 2025 and 1.2% by 2026.
The Washington-based institution highlighted that these forecasts do not yet account for the president-elect’s promises to deregulate and cut taxes, measures which could unleash further growth.
Trump’s economic policies
Donald Trump’s return has already reignited optimism among investors and businesses in the US. His renewed focus on tax cuts and deregulation, hallmarks of his previous presidency, is expected to further stimulate economic expansion. The World Bank noted that an extension of Trump’s sweeping tax cuts could add up to 0.4 percentage points to US growth in 2026.
In contrast, Europe continues to grapple with economic challenges. Economists are now predicting further interest rate cuts by the European Central Bank as major economies like Germany and France struggle to achieve meaningful growth.
Diverging trade relations
While Trump’s policies may drive domestic growth, his approach to international trade remains contentious. The EU has been a frequent target of Trump’s trade criticisms, with the president-elect threatening to impose tariffs of up to 20% on imported goods, particularly from Europe and China.
The UK, on the other hand, is attempting to align itself more closely with the US. Prime Minister Sir Keir Starmer is reportedly seeking a “partnership” with the Trump administration to boost UK economic growth and avoid the steep tariffs that Trump has promised to impose on other trading partners.
Davos survey highlights regional divide
A separate survey by the world economic forum (WEF) underscored the growing confidence in the US economy. Ahead of the organisation’s annual meeting in Davos, switzerland, 44% of global economists polled predicted strong US growth in 2025, a significant jump from just 15% in August 2024.
By contrast, the survey painted a grim picture for Europe, which remains the weakest-performing region for the third consecutive year. Nearly three-quarters of those polled expected “weak or very weak growth” across the eurozone.
Inflation and debt concerns
While US economic prospects remain strong, the World Bank warned of risks that could undermine growth. It cautioned that a 10-percentage-point increase in US tariffs on all trading partners could shave 0.2 percentage points off global economic growth this year, with additional proportional retaliatory tariffs reducing growth by a further 0.3 percentage points by 2025.
Furthermore, the potential for renewed tax cuts under Trump has raised concerns about inflation and public debt. Ayhan Kose, the World Bank’s deputy chief economist, warned that the threat of inflation remains a key challenge.
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“I think it’s fair to say that the war against inflation is still there,” Kose said. “Central bankers have done a pretty good job reducing inflation close to their target, but they need to be alert going forward.”
Public debt, already a pressing issue, is expected to rise to unsustainable levels if tax cuts are implemented without offsetting revenue measures.
Uncertain times ahead
Indermit Gill, the World Bank’s chief economist, added that fears over higher inflation could linger for years. “It could be three, four, or five years before these inflation concerns are truly behind us,” he said.
The contrasting fortunes of the US and Europe reflect not only differing policy choices but also the underlying resilience of their respective economies. While the US gears up for another period of robust growth, Europe faces an uphill battle to close the gap.
