The European Union faces a widening innovation gap with the United States, driven by President Trump’s aggressive trade and tax policies. As 2025 draws to a close, Brussels has yet to mount an effective response, leaving investors increasingly frustrated and redirecting capital across the Atlantic. This shift isn’t just about money; it’s about the future of technological leadership.
The US Advantage: Incentives and Tariffs
The Trump administration has weaponized economic policy, making investment in the US financially irresistible. The “Big Beautiful Bill” — a sweeping domestic law with global reach — offers 100% bonus depreciation for new machinery and factories, plus full expensing of domestic R&D costs. This effectively subsidizes innovation within the US, while the threat of tariffs on EU exports further incentivizes companies to relocate.
The EU-US trade deal, agreed in July, exacerbated the situation by levying a 15% tariff on most EU industrial exports to the US while largely exempting US goods entering the EU. This created a clear imbalance: the EU ships products into the US at a disadvantage, while American products flow into Europe tariff-free.
Investment Exodus: Numbers Don’t Lie
The numbers paint a stark picture. A recent European Round Table for Industry report found that only 55% of CEOs plan to adhere to previous investment commitments in Europe. A mere 8% intend to increase investment, while 38% are reducing or postponing plans altogether.
The US, meanwhile, attracts more investment than originally planned by 45% of respondents. This is not just a preference; it’s a rational economic response to clear incentives.
- AI Funding: The US captured over 80% of global AI funding in the first three quarters of 2025, exceeding €100 billion. The entire EU attracted just under €7 billion — a 15-to-1 deficit.
- Pharmaceutical Shift: European pharmaceutical giants have pledged over €100 billion for US expansion in 2025 alone, including commitments from Roche (€40 billion ), Sanofi (€17 billion ), and AstraZeneca (€40 billion ).
- Semiconductor Lag: The EU aims for 20% market share in semiconductor manufacturing by 2030, but is one of the slowest-growing regions in the sector.
Deregulation as a Desperate Measure
Faced with this outflow, the European Commission has pivoted to aggressive deregulation. Six “omnibus” proposals covering energy, finance, agriculture, technology, defense, and chemicals aim to cut red tape and reduce bureaucratic costs. The “Digital Omnibus,” delaying provisions of the AI Act and modifying GDPR, is a prime example.
However, these measures still face legislative scrutiny, administrative hurdles, and political backlash. The EU remains far from offering the immediate financial certainty of avoiding US tariffs while benefiting from Trump’s policies.
Conclusion
The data is conclusive: the EU is losing the battle for innovation. Without decisive action, Europe risks becoming a secondary player in the global technology landscape. The choice is simple for corporations: relocate to the US, avoid tariffs, and reap massive tax benefits. The EU’s slow response has already triggered a substantial investment shift, and unless Brussels moves faster, the innovation gap will only widen.
