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Donald Trump's national security strategy presents a misguided assessment of the European Union. The document asserts that open-border policies and so-called "woke" agendas pose an grave threat to European civilization. However, this argument rests on a fundamental misinterpretation of the situation. The true danger confronting Europe is not societal but economic and technological backwardness.

A Glaring Growth Divide Separating the US and Europe

Statistics reveal a stark contrast. Between 2008 and 2023, American economic output grew by eighty-seven percent, compared to a paltry 13.5% growth for the European Union. During this time, European income per person dropped from over three-quarters to just 50% of the US level. Strikingly, even Mississippi now has a higher per capita income than several leading European economies like France and Italy.

Today, roughly half of the global top fifty tech companies are US-based, while only four are European.

The Innovation Deficit: The Core Question

The growing disparity stems from stronger efficiency gains in the US, largely due to breakthroughs and higher total factor productivity. The landscape of global tech dominance is overwhelmingly American. Over the past fifty years, 241 US firms have grown into enterprises valued at more than ten billion dollars, compared with just 14 in the European continent.

This disparity raises a pressing question: As the competition for future industries like AI, semiconductors, and fusion energy, where does the EU positioned? Experts widely agree it is largely a two-horse race involving the United States and China, with Europe starting at a significant disadvantage.

Root Causes of the Continent's Technological Lag

A number of major reasons account for this innovation chasm.

• Financing Ecosystem: The US boasts a far deeper and more dynamic network for funding startups. The EU has yet to establish a true capital markets union, which limits the growth potential of new firms.
• Regulatory Fragmentation: Complex and divided regulation hamper Europe. A US startup can launch a service under one set of laws to access a consumer base of over 330 million. The European Union, despite a bigger population size, is split among 27 different national systems, creating huge market obstacles.
• Mindset Differences: Views on risk-taking differ sharply. In parts of Europe, a startup's collapse was once viewed with penalties, whereas in the US, it is often seen as a badge of experience.
• Military Investment: The United States enjoys a tightly woven academic-military-industrial complex. The continent's long-term lack of spending in defense has weakened its ability in breakthrough innovation.

A Path Forward: Reasons for Hopefulness

Despite these challenges, there are reasons for optimism. European leaders are increasingly aware of the existential challenge and have started to propose substantial change. Key reports on European competitiveness and the single market highlight the need for major reforms.

Given appropriate policies and regulatory reforms, these assets could support much higher levels of business-led breakthroughs.

Europe still possesses significant strengths: high-quality human capital, top-tier schools and universities, and world-class labs. Coupled with a vast domestic consumer base and high savings rates, these foundations have the potential to trigger a new wave of venture creation.

Crucially, even if the EU does not take the lead in creating cutting-edge technologies, it can still dramatically boost economic output by adopting and adapting advancements from elsewhere.

An Inflection Point

The European Union now faces a decisive crossroads. As the saying goes, economic erosion often happens "slowly, then all at once". So far, Europe's technological decline has been gradual. However, without bold steps to tackle its structural weaknesses, today's slow erosion could turn into a sudden and irreversible loss of world influence.