How will Trump's tariffs affect Europeans? - Analysis/ Trade war will hurt the economy and consumers
The specter of a transatlantic trade war looms over the United States and the European Union again. On March 12, the US imposed a 25% tariff on steel and aluminum imports, and the Union responded with countermeasures.
In her statement, Commission President Ursula von der Leyen stressed that tariffs "harm businesses and even worse consumers." Economic experts argue that tariffs will never be profitable.
" Any tariff policy will affect the means of production. So when it comes to natural resources like steel and aluminum, it will ultimately have an impact on the production machine at the European Union level ," they explain.
"However, we cannot be sure whether these tariffs are accompanied by additional policies from the EU institutions, we do not know whether this €26 billion response from the EU will ultimately create an inflationary impact for the citizens of the bloc."
Research shows tariffs will hit the US first
The latest research from the German Kiel Institute shows that tariffs raised by the United States against the European Union will, first and foremost, harm the US when it comes to inflation, employment levels and growth rates.
But what about European citizens?
"The impact on European citizens is something we cannot predict at the moment, because there are different ways in which tariffs could ultimately affect citizens," the analysts explain, adding that citizens may shift their consumption to domestic goods when they see that imported goods are becoming more expensive. However, there are also two very important problems, such as the monetary response and the financial market response.
Do Europeans have enough alternatives?
Economists believe the EU can replace most, if not all, American products, such as electric vehicles.
"We noticed with the decline in Tesla sales, but also one of the most widely used artificial intelligence tools, like ChatGPT, could be replaced by the French alternative Mistral AI. I think that even if we consider some of the most widely used products, perhaps with the exception of Google, the vast majority could be realistically replaced," they emphasize.
What we cannot replace is US dominance over the financial system and especially in capital markets.
A US recession with global effects is a possible scenario
According to analysts, the European Union remains dependent on the American financial system. A possible recession in the US could affect the European economy because the EU cannot be immune to the consequences.
"We are still uncertain about what will happen to the US and consequently to international growth. Even Donald Trump mentioned that things could get worse before they get better. And if we keep this in mind, this could translate into a recession with worldwide impact ," the economists explain.
Although the EU has responded to global crises more effectively in the past, the bloc is still quite unprepared to deal with a broad global recession and this needs to change.
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