With productivity growth lagging and innovation increasingly taking place elsewhere, Europe must confront its structural weaknesses or risk falling further behind.

US President Donald Trump's new National Security Strategy offers a misguided assessment of Europe, long regarded as America's most reliable ally. Unrestrained immigration and other policies derided by administration officials as "woke," it warns, could lead to "civilizational erasure" within a few decades.

That argument rests on a fundamental misreading of Europe's current predicament. While the European Union does face an existential threat, it has little to do with immigration or cultural politics. In fact, the share of foreign-born residents in the United States is slightly higher than in Europe.

The real threat facing Europe lies in its own economic and technological backwardness. Between 2008 and 2023, GDP rose by 87% in the US, compared to just 13.5% in the EU. Over the same period, the EU's GDP per capita fell from 76.5% of the US level to 50%. Even the poorest US state – Mississippi – has a higher per capita income than that of several major European economies, including France, Italy, and the EU average.

This widening economic gap cannot be explained by demographics. Instead, it reflects stronger productivity growth in the US, largely owing to technological innovation and higher total factor productivity. Today, roughly half of the world's 50 largest technology firms are American, while only four are European. Over the past five decades, 241 US firms have grown from startups into companies with market capitalizations of at least $10 billion, compared with just 14 in Europe.

These trends raise a critical question: Which countries will lead the industries of the future, and where does Europe fit in? The race for technological leadership now spans a wide range of fields, including AI and machine learning, semiconductor design and production, robotics, quantum computing, fusion energy, fintech, and defense technologies. Europe enters this race at a clear disadvantage.

Whether the US or China currently leads the industries of the future remains open to debate, but most observers agree that it's essentially a two-horse race, with America still ahead in several key areas. Beyond that, innovation is concentrated in countries like Japan, Taiwan, South Korea, India, and Israel. In Europe, by contrast, innovative activities are largely confined to the United Kingdom, Germany, France, and Switzerland – two of which are not even EU member states.

It is hardly a surprise, then, that while the US and China dominate global technological rankings, Europe finds itself far from the top. And the outlook is anything but reassuring, given that the next wave of innovation is widely expected to be more disruptive than anything we have seen over the past half-century.