In a world shaken by Donald Trump’s return to the White House and his renewed tariff crusade against half the planet, Italian-American economist Mariana Mazzucato keeps her focus on what really matters: industrial policy cannot be reduced to a battle over subsidies, taxes, or a defensive war of percentages. “What Trump is doing right now is not an industrial strategy; it is its destruction. He is destroying all the progress made by previous U.S. presidents,” she warns. Since January, the Republican leader has unleashed a new wave of tariffs that threatens to drag Europe and the rest of the world into a spiral of retaliation and protectionism — just as the European bloc tries to reclaim its own industrial vision.
Mazzucato, a professor of Innovation Economics and Public Value, and director of the Institute for Innovation and Public Purpose at University College London (UCL), traveled to Spain to receive the Emilio Ontiveros Economics Award, in recognition of her intellectual contribution to redefining economic value, the role of the state, and the public mission as drivers of development.
In an interview with EL PAÍS, Mazzucato expressed skepticism about the path Brussels might take if it chooses to respond to Washington in kind. “Europe should not fall into a childish logic of ‘if you hurt me, I’ll hurt you.’ It’s a trap that weakens it,” she asserts.
In her view, tariffs only make sense if they are part of a robust industrial strategy aimed at productive transformation. “[Alexander] Hamilton imposed tariffs to protect nascent industries while building capabilities. Trump imposes tariffs for no other reason. He is sabotaging the very industrial architecture that Biden began building with the CHIPS Act to secure U.S. sovereignty in production, something everyone wants.”
Europe, she insists, must resist the temptation to use 19th-century tools to tackle 21st-century challenges. Instead of merely protecting itself, it must rebuild. “The priority is not to close itself off, but to reimagine its industrial system from the ground up. And that means leaving behind the chronic fear of deficits.”
The fiscal debate has reignited strongly across the continent after the European Commission approved mobilizing up to €800 billion ($926 billion) to strengthen common defense. This unprecedented shift — although a direct response to NATO’s pressure for European allies to spend at least 2% of their GDP on defense (and which Trump announced he wants to increase to 5%) — has unleashed an old reflex: fear of debt.
Mazzucato dismantles the classic comparison between a state and a household. “The government is not a household with a limited budget. A state can and should use public investment to boost its economy. If the investment generates growth, it also generates tax revenues that offset the initial deficit.”
The point, she argues, is not how much is spent, but how it is spent. The key is that public investments are aimed at solving concrete problems — security, yes, but also health, climate, and education — through effective partnerships with the private sector. “What cannot continue to happen is for public money to end up in the hands of companies that neither transform nor contribute to the common good. This parasitic relationship between the public and private sectors is hindering our ability to solve major challenges,” she says.
In this regard, she cites the German model as an example. There, the public bank KfW has conditioned its loans to the steel industry on specific environmental goals, such as reducing material content in production. “That is a symbiotic relationship: the state supports but also demands. Those who invest are rewarded, not those who shout the loudest.”
In contrast to this approach, Mazzucato points out the structural shortcomings of other countries like Italy or even the United Kingdom, where the public sector lacks the capacity to negotiate conditions or implement long-term strategies. “It’s not just about giving or spending money. Europe needs to strengthen its public administration. If you don’t know how to use funds, it doesn’t matter how much you have,” she says.
Europe’s institutional weakness thus becomes an industrial problem. Compared to powers like the United States — which, despite its liberal rhetoric, has a well-structured and generously funded national innovation system — or China — which deploys a meritocratic civil service and mobilizes trillions toward sustainability — Europe appears fragmented and captive to self-contained fiscal rules. “China isn’t perfect, far from it, but it doesn’t have our deficit hang-ups. When they invest, they invest seriously. We can cut absurdly, without thinking about what to invest in, to meet an artificial target of 3% of GDP. That’s suicidal.”
In this context, Mazzucato says Spain is an exception. “It is doing better than many European countries. It has maintained more consistent investment in health and the ecological transition, even after the pandemic, and has shown a more coherent vision. Not everything is perfect, but there is a clarity of purpose that we don’t see in places like Italy or the United Kingdom,” she notes. The caveat, however, is political instability that, in her opinion, overshadows economic progress.
The new geopolitical context has torn apart the European model’s seams. Trump’s threats to reduce NATO military support, Russia’s invasion of Ukraine, and the growing risk of a recession triggered by trade wars have forced Brussels to act. But Mazzucato warns that this shift toward investment should not be limited just to military spending. “Why can’t we do the same with public health, the education system, or the fight against climate change? Investing in these areas isn’t charity. It’s survival,” she argues.
“Not investing in the green transition, health, or social protection ends up costing much more. We saw this with the pandemic: due to unprepared systems, lockdowns were longer, economies suffered more. The same is true of the climate. Droughts, floods, and biodiversity loss are economic burdens. But if we treat these investments only as expenses, we miss the opportunity to use them to innovate and grow,” says Mazzucato.
Behind this lack of ambition lies a greater political threat: the rise of populism. In Europe, democracy is being eroded from the right, and for Mazzucato, there is a direct connection between the fall of living conditions and support for the far right. “Macroeconomic data may be good, but when wages stagnate, jobs are precarious, housing is unaffordable, and public services deteriorate, it’s normal for people to rebel. And if there isn’t a clear and hopeful progressive project, fascism fills that void.”
The economist insists that it’s not about dismissing voters as stupid. It’s about offering a narrative and policies that address their real problems. “We need clarity, not condescension. Solutions can’t be limited to technocracy and data. We must speak with ambition, with shared goals. That’s why I insist so much on a transformative industrial strategy: because it’s the way to rebuild democratic legitimacy from the economic perspective.”
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