Trump is a gift to European AI

Europe has taken a beating from the new US administration.

JD Vance spent his first trip overseas as vice president last month blasting the European Union for overregulation and stifling democracy. Elon Musk uses his X platform to champion far-right parties across our continent, and Steve Bannon is busy giving Nazi salutes.

Then Trump himself delivered the clearest antagonistic broadside. Announcing he is preparing to hit Europe with 25% tariffs, Trump said the EU was “formed in order to screw the United States. That’s the purpose of it, and they’ve done a good job of it.” He followed up that announcement with the stunning Oval Office rebuke of Ukraine’s President Zelenskyy, making clear once again that Europe is on its own when it comes to doing what’s right. 

Europe can run scared, or we can take this moment as a wake-up call. For the European startups we work with, the first six weeks of Trump 2.0 has been head-spinning. But it’s also given us something we desperately needed: a sense of European solidarity and patriotism. 

Europe is crying out for strength and leadership, something Germany’s next leader Friedrich Merz will aim to deliver. And there is no area where this is more important than in AI —a revolutionising technology that has the potential to transform Europe’s lagging economy and generate huge societal value across our key industries, from healthcare to manufacturing and beyond. 

In conversation after conversation we’ve had with founders and investors here, the message is the same: Europe not only has the tools and capability to compete in the AI race, but we also now have the moral obligation to build the next great wave of companies here, with European talent and European values. 

Importantly, the American narrative that Europe isn’t a good place to build world-changing companies is plainly wrong. While there’s much Europe can do to be more start-up friendly, from simplifying bureaucracy to easing high-skilled immigration, we’re headed in the right direction.

We must admit that JD Vance had a point at the AI Action Summit in Paris last month when he said that restricting AI’s development “would mean paralysing one of the most promising technologies we have seen in generations.” Vance meant that as a novel critique, but that is now basically conventional wisdom in Europe.

Indeed, there is broad agreement that the last decade of tech regulation here, culminating with the passage of the EU AI Act, was far too onerous and has cost the EU dearly in terms of productivity. This was put in stark relief in Mario Draghi’s report last year on the future of European competitiveness, which lambasted the toll regulation has taken on small and medium-sized enterprises and also noted that one third of our “unicorns” relocated abroad, mostly to the US, due to regulatory and financial concerns.

Times are already changing, with Europe becoming increasingly tech and startup friendly over the last year, for example the recent InvestAI EU initiative to pump €200 billion of investment into AI. 

EU legislators have meanwhile slowed down the rule-making pipeline and have shifted the focus to a more innovation-friendly policy framework, exemplified in the recent EU “work program” that sets the agenda, which among other things includes strong simplification dimensions, with the goal of reducing administrative burdens by at least 25% for corporates and at least 35% for SMEs. 

What will that mean for founders?

In practice the EU AI Act, as the most prominent example of recent European digital law, does not affect 80-90% of enterprises because they either do not fall under the “AI system” definition, or they do not qualify as “high risk” under the act and hence need to follow only transparency obligations.

For example, in an interpretation guide published recently, the European Commission stated that linear and logistic regression systems widely used in the financial world for credit risk models are not covered by the definition of the AI Act.

EU legislators do not seem to want to admit it publicly, because it would undercut the “achievement” of regulating the technology first, but the bloc is clearly pivoting toward an approach that incentivises development rather than policing it — mirroring the US just when we have the momentum to be more aggressive in the AI “arms race.”

While the new American leadership decries Europe, we also think laws in the US on AI will mirror ours to some extent. Currently, US product safety regulation is largely legislated on the state level. Some of the requirements like auditing high-risk AI systems and mitigating biases are similar to what you find in the EU AI Act. 

Ultimately, regulation does not stop the best entrepreneurs from building disruptive companies. Truly innovative founders see Europe’s problems — struggling automotive and energy-intensive industries — and are working to disrupt these sectors and build new solutions and new giant companies.

As the Trump administration cuts down research budgets significantly in the US, European institutions stand to benefit in luring top researchers — who can ultimately build top companies and the technologies underpinning them.

That’s a huge opportunity for American entrepreneurs and investors who are brave enough to not be scared off by a false “Europe is dying” narrative. As the US continues to trend toward more extreme views, Europe can be home to founders and investors who are uncomfortable with Silicon Valley’s deepening ties to Trump. Come build with us here, instead. 

This shouldn’t be a tough sell. Europe has a hugely attractive ecosystem for AI development, thanks to our talent pool, research institutions, and rich domain expertise in industries that can most readily apply AI to their businesses — across logistics, manufacturing, robotics, chemicals, health care, and more. 

The development of AI isn’t just about flashy large language models, chip manufacturing, and the “US vs. China” narrative —it’s about where AI and machine learning can be deployed and developed most effectively to have a positive human impact. Europe has a central role here, and thanks to Trump, Musk, and Vance, we now have the moral imperative.

We can start by taking a page out of America’s book and getting pushier with our PR, instead of always playing defence. Europe is not an innovation backwater. We’re here to play in the AI arms race, and we’re playing to win.

Rasmus Rothe is the cofounder and general partner of Merantix Capital, which invests in and builds AI companies. Robert Kilian is CEO of AI testing provider CertifAI and lectures digital regulation at Humboldt University Berlin. Both are board members of the German AI Association.

Read the orginal article: https://sifted.eu/articles/trump-is-a-gift-to-european-ai/