Fresh statistics show an interesting trend: new FDI projects in the US increased to 14.3% in 2024, reaching the record. Meanwhile, major European countries lack investments and seem to lag behind. This raises a question: Will Trump’s tariffs change the situation and what will Europe do to remain competitive?
Investments in the US will continue to grow
The new period for tracking new investment inflow has started with a major event both in economics and politics — Trump’s inauguration. As a president now, his second term is marked with a large number of provocative statements and actions. On Monday, 10 February, he substantially raised aluminium tariffs to 25% from 10%, aiming to make national manufacturing stronger. As tariffs make it more expensive to import goods into the United States, it creates incentives to move production inside the country. This means that investments in manufacturing in the United States will become even more appealing and, therefore, profitable.
Thus, Trump is actively promoting a strategy of protectionism, creating favourable conditions for domestic production and, at the same time, making it more difficult to import goods from abroad. For companies focused on the American market, it is more logical to launch a business inside the country in order to avoid additional costs associated with trade barriers. That is why the flow of foreign direct investment to the United States will only continue to grow — the tougher the trade restrictions, the more companies prefer to move production to America itself in order to remain competitive in the largest and most promising market.
What about Europe?
Europe, although not that demonstratively like the USA, protects its economy with strict regulatory restrictions. ESG standards (environmental, social and governance) have become the main tool, which makes it more difficult for new investors to enter the market and create a more closed economic environment. In fact, the EU relies not on direct protection from external competition but on creating conditions under which it becomes beneficial to work in Europe only for those who fully comply with the established rules.
To understand what I mean, let’s look at some evidence. If you’ve ever been to Europe, you may have noticed that all plastic bottles now come with caps that remain fixed. This change was implemented for two key reasons. First, there is a strong environmental incentive—millions of plastic caps that previously ended up as waste are now less likely to pollute the environment. Second, it serves as yet another regulatory requirement that companies must comply with in order to operate within the European market.
It turns out that Europe’s strategy is to regulate the market through strict environmental and social requirements, which at the same time limits competition and supports local producers. Companies that do not comply with ESG standards lose the opportunity to operate in the EU market, even if their products are cheaper or more technologically advanced. On the one hand, this makes the European economy more stable in the long term, and on the other hand, it reduces its attractiveness to investors who find it easier to work in a more flexible environment.
Not as simple as it seems
The economic rivalry between the United States and Europe is far from as straightforward as it might seem at first glance. Although many believe that the American economy is significantly superior to the European one, a more thorough analysis reveals that the gap between them is not so drastic. If we take into account the GDP of the entire EU, as well as economic ties with neighbouring countries, we can see that Europe as a whole still remains one of the world’s largest economies.
But this competition isn’t just about investment or economic size—it’s also a fight for leadership in key industries. Take, for example, automobiles—here, Europe still has the edge. For example, the world leaders from the region, Volkswagen Group, BMW, and Mercedes, don’t just dominate the premium segment—they’re also pushing ahead in electric vehicles and self-driving technology.
At the same time, Europe is not afraid to set limits and protect its own market. A good example is the tariffs on Chinese electric cars, designed to keep European automakers competitive. Unlike the U.S., which openly uses trade barriers and subsidies, Europe plays a longer, more strategic game.
Therefore, in the end, it’s not just about how many startups appear and how much investments they attract—it’s about who stays on top in the long run. And no matter how much innovation happens elsewhere, big players will last. Is there any difference in how many small enterprises you have if leading auto concerns will sweep all competitors in 15 years?
About the Author
Julia Khandoshko, CEO at the European broker Mind Money. She is an experienced C-level executive and financial services professional with over 10 years of experience in technology innovation and capital markets.
