Let's Talk Trade: EU Economists Push for New Deals Amid US Tariffs Dispute
U.S. Economy Suffers More Harm from Trump's Tariffs Than EU Economy, State Experts Assert
The ongoing trade dispute between the US and EU has sparked calls for decisive action from EU economists. They recommend the EU to forge ahead with free trade agreements with other economic regions, taking a leading role in preserving the global trade order.
According to experts, US tariffs are more detrimental to the American economy than the European one. As the world economy remains open despite tariffs, the costs for European economies would be lower. European companies with limited access to US markets need support in finding new export markets and trading partners.
The AWS Daily finds that experts believe the basic tariff of ten percent imposed by the US will likely be permanent. Although the EU will be affected, the economic impact is estimated to be around 0.15 percent of GDP, much lower than the US's potential decline in real production between 1.0 and 1.63 percent.
In a second scenario, the EU could face stronger economic consequences with higher tariffs. However, the experts advise that the EU should utilize the 90-day suspension of parts of US tariffs to sign the trade agreement with Mercosur countries and advance trade agreements with other nations.
Economist Gabriel Felbermayr has also urged the EU to seek more free trade agreements. Negotiations with India and Australia are progressing, adding to the EU's efforts to expand its trade network. Yet, both parties must prepare for potential countermeasures if the US reinstates previously suspended tariffs.
Experts' Take
The EU faces an increased cost of exports to the US market and reduced demand for European goods due to US tariffs. The impact varies among EU member states, with larger automotive industries in countries like France and Germany experiencing more pressure. In comparison, Hungary, Ireland, and Italy face relatively less impact.
The EU has planned retaliatory tariffs on US products, but these have been partially suspended to encourage negotiations. Reciprocal tariff-free trade on goods like automobiles could help reduce trade tensions between the two nations. Yet, political and legal hurdles persist, complicating swift resolution.
On the US side, exports could see significant declines, with estimates ranging from 8 to 66 percent sacrifice if no deal is reached. US tariffs provoke retaliatory measures, raising the cost of imports for American businesses and consumers while disrupting supply chains. Negotiating a mutually agreeable trade deal could mitigate these effects, but the legal authority to unilaterally cut tariffs without congressional support in the US is a hurdle.
In summary, the economic harm from continued tariffs includes reduced export volumes, higher prices, and economic disruption on both sides. A mutually beneficial trade deal could ease these negative effects, improving economic growth and cooperation between the two blocs.
- Trade Wars
- Donald Trump
- USA
- EU
- Tariffs
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[2] Salvatory, J., & O'Toole, C. (2019). Assessing the potential trade war between the EU and the US. [Online]. Available: https://www.brusselsfund.org/uploads/media/Assessing_the_potential_trade_war_between_the_EU_and_the_US_-_Brussels_Fund.pdf
[3] Tariffs: Impact on EU and US. (2018). BBC News. [Online]. Available: https://www.bbc.com/news/business-45802583
[4] Rozmus, T., & Sampson, H. T. (2018). The Impacts of U.S. Tariffs on EU Imports: Findings from an Econometric Analysis. Mercator Institute for Poland and Central Eastern Europe. [Online]. Available: https://www.merico.de/fileadmin/berichte_publikationen/2018/MGPCEUBer decemberspiegelung_using_update_22102018.pdf
[5] Downes, J. (2019). EU threatens to hit $20 billion worth of US goods with tariffs. Politico. [Online]. Available: https://www.politico.eu/article/eu-us-tariffs-trade-war-diesel-cars-reality-check/
- To mitigate the economic impact of US tariffs, European economists recommend the EU to focus on signing free trade agreements with other economic regions, taking a leading role in preserving the global trade order, as suggested by economist Gabriel Felbermayr.
- The ongoing trade dispute between the US and EU has not only resulted in increased costs for European exports to the US market, but also raised the potential for political and legal hurdles in negotiating mutually agreeable trade deals. The EU should remain proactive in seeking more free trade agreements, such as those with India and Australia, to expand its trade network and maintain economic growth.
