Thursday, November 14

Trump's tariffs and what the European Union should expect

Donald Trump loves tariffs. In his first term as president of the United States, he applied a series of them on washing machines, solar panels and imports of steel and aluminum, which affected countries around the world, political allies or not.

During the last election campaign, he promised even more. In an attempt to increase employment in the United States manufacturing sector, Trump had considered adding a 10% tariff to all imports; Then he talked about 20%. Everything from China would be hit by a devastating 60% tariff.

European products would become more expensive. And high US tariffs on Chinese goods could also hurt Europe: If China can no longer export to the US, it will turn to Europe to sell its products, which could flood the market.

The EU, a “mini China” for Trump

Trump has put a lot of attention on China, but he has also called the EU a “mini China”. “They don’t buy our cars. They don’t buy our agricultural products. “They sell millions and millions of cars in the United States,” he said at a rally in Pennsylvania.

The European Union sells much more to the United States than it buys from itbut they both have a lot in common and a lot to lose. A tariff conflict between the US and the EU could also become a problem for the US economy. For example, it could drive up prices for American consumers and contribute to inflation.

In her congratulatory message to Trump for his electoral victory, the president of the European Commission, Ursula von de Leyen, reminded him: “Millions of jobs and billions in trade and investment on each side of the Atlantic depend on the dynamism and the stability of our economic relations.”

Trump 2.0: the price of protectionism

“Trump’s tariffs are a serious threat to the European economyand especially for export-oriented countries like Germany,” says Niclas Poitiers, researcher at the think tank Bruegel, specialized in international trade and economics.

“The European economy continues to reel from its mistaken decision to buy its energy from Russia and suffers from falling demand from China. Trump’s tariffs further darken their economic prospects,” he told DW.

Clemens Fuest, president of the Munich-based ifo Institute for Economic Research, warned in a press release from the effects that “a clearly protectionist agenda would have, based on higher import tariffs and greater restrictions on international tradeparticularly for China and potentially for Europe as well.”

The ifo Institute calculated that a 20% tariff on imported goods could drop German exports to the US by around 15% and cause economic damage of 33 billion euros ($35.3 billion).

The effectiveness of tariffs

According to a dossier published by the Federation of German Industry (BDI), the EU must improve its own competitiveness, strengthen its defense capabilities and address the challenges posed by China. The priority must be avoiding new tariffs. If that does not work, countermeasures will have to be taken, but this will require a united front of the 27 EU Member States.

Trump believes that tariffs are a useful tool to advance his objectivessays Penny Naas, a public policy expert at the German Marshall Fund of the United States in Washington, DC. She adds that, for him, applying them is an effective way to rebalance trade deficits.

Trump is a negotiator and has, in the past, used the threat of tariffs to extract concessions from trading partners, Naas told DW.

For his part, Poitiers, of the Bruegel center, emphasizes that Trump’s tariffs would not lead to the end of globalization and trade, as some fear. However, he thinks Trump’s next presidency could mark the end of US-led globalization. “Europe now needs to build coalitions with like-minded countries to preserve its prosperity, which is largely based on trade,” he says.

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