The Flanders-China Chamber of Commerce organized a webinar on 29 April 2025.. During this webinar, Mr. Koen De Leus, Chief Economist – Economic Research at BNP Paribas Fortis, spoke about: “How Trump is Making Europe Great Again”.
Ms. Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, introduced the speaker and the topic of the webinar. Mr. Koen De Leus, Chief Economist – Economic Research at BNP Paribas Fortis, is the co-author of the timely book, The New World Economy and Five Trends, and he is a respected voice in macro-economic analysis, frequently speaking on international trade, geopolitical shifts, and the economic impact of policy changes. Mr. De Leus is widely recognized for providing clear insights into global economic trends and the challenges they pose for businesses. Today's topic could not be more relevant, Trump single-handedly dismantling the post-war liberal economic system. Even with import tariffs of 10%, global trade is regressing to 1930s levels, with China particularly impacted. At the same time, his actions are forcing Europe to realize just how dependent we have become. The critical question before us is, what comes next and how should businesses adapt to this new world? Businesses thrive on certainty, but geopolitical developments such as Trump's incoherent trade strategy has deeply undermined that certainty, presenting serious challenges to global trade. Among all the tariffs he imposed, China was the hardest hit. Trump initiated unilateral tariffs of 145% on Chinese goods and China responded with 125% tariffs on U.S. goods. This level of conflict is clearly unsustainable.
Turning to EU-China trade, we observe a deep mutual dependence today. The EU and China trade over €2 billion a day, making China the EU's third largest trading partner with total bilateral trade reaching €730 billion annually. Our trade is driven by high-value sectors, machinery, vehicles, advanced manufacturing goods and chemicals. Investment flows also demonstrate this close connection. In 2024, Chinese direct investment in the EU reached a record €185 billion, while European investment in China remains strong at €184 billion accumulated investment. While the challenges are significant, they also create new opportunities for European companies. This is a crucial moment to further deepen engagement with this fast-moving, evolving Chinese market.
Mr. Koen De Leus, Chief Economist – Economic Research at BNP Paribas Fortis, said talking about the economic outlook in the time of Trump is very, very, very difficult, so we are going to talk about economic volatility in the era of the "Trump Shock", first what is he doing with the economy and second I think Trump is making Europe great again.
Volatility and uncertainty are at their highest level ever and you could even say that Donald Trump is worse than a virus. But this uncertainty is not solely due to Donald Trump. Uncertainty started around 2020, when it was way higher compared to the period up to 1997. So there is something deeper going on in creating this volatility and uncertainty. We have entered a “Fourth Turning” of conflicts within countries, where the opposition is winning elections, such as in the South of Belgium, where for the first time in 100 years, the socialists didn't win. You see it in Germany, in Canada and in the United States, where you went from the Republicans to the Democrats and then again to the Republicans, so there is something deeply troubling that makes that people constantly want to see change that can't be pushed through by the center because it doesn't have support enough anymore to push through these reforms.
We are in the period of "the Fourth Turning", referring to a book that was written 30 years ago by Neil Howe and William Strauss. Two years ago, Neil Howe updated the book and said that everything that we talked about 30 years ago is happening today. What is a fourth turning? It is 20 years of chaos in an 80-year period, and now we are in the fifth “fourth turning” in the United States since 1700. So it's a returning cycle of 80 years because that's the average lifespan of a human being. After second world war, people said we never want this to happen again so we're going to create institutions in order to stabilize the economy with the World Trade Organization, the IMF, NATO and the World Health Organization. We had all these institutions that in fact put guardrails around the world economy in order that it would be stabilized. And now 80 years later, you see that this generation that really created these institutions has almost died out, and the new generation asks what do these institutions still serve. We don't have any guardrails anymore to stabilize the economy and so this means that very slowly we are probably going to reach the peak in this fourth turning. According to Neil Howe, this fourth turning probably started in 2008 so this means that the peak would be reached somewhere between 2028 and 2030.
Did the MAGA movement in the United States make America great again? Did it change compared to five years ago? The actions of Donald Trump are much more aggressive now. He is surrounded now by yes sayers and even the corporate entrepreneurs are afraid to tell him what he shouldn't do. Six years ago you could ask whether you had to take Donald Trump seriously or literally, but you have to take him seriously and literally this time. You have four pictures in the Oval Office with that of James Polk, the 11th President added. He was the most expansionist president ever who started the Mexican-U.S. war in 1845, and in 1848, the U.S. expanded its the territory with Texas, New Mexico, California, Utah, Arizona and so on. If Donald Trump is talking about Canada being the 51st state of the United States, or if he says, Greenland is very nice and it's ours, take him seriously because he's not going to sit quiet and say okay I don't want it anymore. Expect the unexpected and unbelievable from Donald Trump.
Concerning the world's trade, if you look to the effective tariff rates today in the European Union, we are at an average tariff rate for European products going into the United States of 8.5%. Probably in the future we will have an average import tariff of 16%. If we go worldwide then you see based on the current announcements we are at 24%. If you look what the tariffs were in the '30s, you had a peak at 25%. So we have the same amount of tariffs that were in place at the moment of the Great Depression. China is still the big enemy of the United States. This is a battle for hegemony, China with 1.5 billion people and with an economic growth that is still going pretty strong. Of course, they have their own problems with real estate and everything. If you have such a growing economy of course this economy wants a piece of the pie and a little bit of a say when it comes to the global order. That is not to the liking of the United States. So they're going to do everything in their power to try to keep China small, which will probably not work that good. With these import tariffs, Donald Trump is really shooting itself in the foot. The dependency of the United States on extra-regional imports – those not coming from Mexico and Canada – is more than 50% of all their supply chains. According to CEPI, Europe has 120 dependencies from other countries, with 74 dependencies on China. China is a little bit dependent on Europe, but much less than Europe is on China. The long-term thinking of China is to produce the intermediate goods for the rest of the world and to become much less dependent on the rest of the world, and you they succeeded big time in that.
In our book, The New World Economy, we say that maybe globalization is going to slow down, but we are not going to go to deglobalization, but to multi-globalization. The United States is really taking the most advantage of this globalization era, but in the multi-globalization era, you see that more and more countries are positioning themselves in between China and the United States or in between China and Europe in order to circumvent these import tariffs. We saw that already last time in 2019, when following an increase in import tariffs, you saw a huge investment of China in Vietnam to export to the United States to circumvent these import tariffs. In regard to multi-globalization, you see a huge increase of the market share of Vietnam from 4% to 9% when it comes to the share of U.S. imports by container ship. U.S. imports from China went down from 40% to 25%, but this was totally replaced by increases coming from Vietnam, South Korea and other countries. It's pretty dangerous when you put a levy of around 47% on imports from Vietnam or Thailand or Cambodia.
Trump wants to have some income because he wants to push through this reduction of corporate taxes in the United States and he wants to extend these tax cuts and the Jobs Act that he installed about 10 years ago. Secondly, he wants to re-industrialize the United States. It is utopia thinking that American workers are going to sit again in these factories like they are doing now in the Philippines and in Vietnam for a salary that probably is half what they can earn in services. This deglobalization could have some major implications. Company profits expressed in percentage of GDP increased from 2000 to 2024, the time frame of hyper globalization from 2000 2010 and then a bit more slow globalization. Profits in percent of GDP have increased from 6% to 12%. If you're to de-globalize, it means that you can't offshore your production anymore, you can't take advantage anymore of cheap labor, meaning that your profit growth is going to slow down and the profits in percent of GDP are going to crash to 10% or 8%.
There are quite a lot of risks ahead. The peak in the Fourth Turning has still to be reached, so volatility and uncertainty are going to be with us for a while longer. How can entrepreneurs prepare? You have to understand the impact of the import tariffs on your sector and in your supply chain and customers as well. If you have a region where you make more than 25% to 30% of your turnover, maybe you should think of diversifying to other areas. During the Covid period we saw an increase in inventories of critical materials, but you also need to regionalize and have a circular economy, because it will make you much less dependent. If you are going to export to the U.S., you need to consider introducing smart contracts, saying that if import tariffs increase or decrease we're going to increase or decrease our cost price with X euros. In these volatile times you need people who can hedge your exchange rate, interest rates and certainly your commodities. Will the dollar still be a reserve currency? The sole safe haven, especially when it comes to the increase in inflation, is gold. In the short term, interest rates will still go down, but we expect structurally higher and increasing interest rates for the coming decades. Something fundamentally has changed in the past four to five years. Long term we are going to see rising risk premiums. Long term there are four inflation shocks: the climate shock; the huge debt; shrinking labor markets and deglobalization. I think in the next couple of years, we will see an inflation that hovers between 2% and 4% instead of 0% and 2%. Interest rates come and go in waves, and now we are going to see structurally higher interest rates. You need to think about different scenarios in the next decade, because the world can change rapidly and radically.
Economic volatility is going to make Europe great again. According to Constanze Stelzenmüller of the Brookings Institute, Germany had outsourced its security to the United States, its energy needs to Russia and its export-led growth to China. After the invasion of Russia in Ukraine, this changed This changed for Germany, but this changed as well for Europe, because energy needs didn't come anymore from Russia, they come now from the United States with LNG. We don't export to China so much anymore. What we see today is that Europe has outsourced its security to the United States, its energy needs to the United States, and its export-led growth to the United States. Europe has become very dependent on the United States, and there comes the new man in the White House. We have to take care of ourselves. We have to make Europe great again. We have to see that we are not so dependent anymore on exports to the United States, we have to create our own demand and invest in infrastructure. The politicians will have to make very important trade-offs that will shape the role of Europe in this new geo-economical environment.
First, geopolitical trade-off. Is there still going to be the primacy of the nation state or is there going to be a much deeper political integration in the European Union? Second, the industrial transformation trade-off. Are we going to preserve the single market or will there be no longer a central fiscal capacity? We really need euro bonds and mutual funding. Lastly, the macro-economic resilience trade-off: keep an export oriented model versus boosting indigenous growth. What Mario Draghi said in his report is a very good summary of what has to be done: closing the innovation gap. No EU company above €100 billion has been established from scratch in the last 50 years, while all six of the trillion-dollar U.S. companies have been. In Europe we have to see that we get the machinery back in order to create new promising companies. We need our competitiveness. What regards goods we lost three percentage points of market share over the past three years. The EU is to keep its climate goals but loosen rules for companies. The problems of EU companies are too much regulation, not enough capable people, and the rising gas and electricity prices. There will be a record capacity addition of LNG by the end of the decade as well as added shipping capacity. There are a lot of internal trade barriers within the EU, which, if reduced could create a much bigger market. We have to increase our security by coordinating defense expenditures and reduce our dependencies, for example of rare earths, where the dependency on China is huge.
A Q&A session concluded the webinar.
