Sleijpen: Europe needs deeper integration to counter global uncertainty

Despite a period of exceptional geopolitical and economic uncertainty, marked by rising tensions and trade fragmentation, global growth, employment, and financial markets have shown surprising resilience.

This paradox, where headlines suggest a weaker economy but macroeconomic data appears stable, prompts a deeper understanding of how shocks are transmitted.

Four main channels influence the economy: trade and supply chains (sanctions, tariffs, bottlenecks), energy and commodities (price volatility, supply security), financial markets (risk premia, capital movements), and confidence and expectations (postponed investments, cautious consumers).

The strength and timing of these effects vary, making the current stability a complex phenomenon that requires careful analysis rather than simple interpretation.

The Netherlands, a small open economy, is highly exposed to external shocks due to its significant trade openness and reliance on imported inputs.

Dutch firms' dependence on the US market has already led to growth projection revisions due to tariffs.

Trade fragmentation effects are often delayed; firms absorb costs or divert trade, with long-term consequences emerging gradually.

While increased defence spending offers short-term stimulus, for the Netherlands, this brings trade-offs like inflationary pressures from a tight labor market and limited domestic spillovers.