EU leaders are developing a two-stage trade strategy plan to counter Republican Donald Trump's plans to raise tariffs if he wins the US presidential election.
Points of attention
- The EU is developing a trade strategy plan to respond to Donald Trump's proposed tariff increases if he wins the US presidential election.
- European officials are planning targeted deals and negotiations with Trump's team to avoid a potential trade war and maintain international trade balance.
- Experts predict that the EU may suffer more than the US from tariff increases, potentially leading to increased inflation in the American economy.
- The EU's trade structure with the US includes large imports of liquefied gas and emphasis on commodities, pharmaceuticals, cars, and luxury goods as major exports.
- Goldman Sachs Chief Economist forecasts that the EU could lose more GDP percentage-wise than the US in a trade war scenario, with implications for inflation rates in both regions.
How the EU is preparing to confront Trump
It is noted that European officials in Brussels are inclined to believe that the best response to Trump's intentions to introduce minimum tariffs of 10% on exports from the EU may be a gingerbread and whip approach.
Trump's promised increase in customs tariffs could reduce European exports to the US by 150 billion euros per year.
European officials intend to approach representatives of Trump's team in the event of his victory in the elections and hold negotiations on the maximum increase in the import of a number of relevant American goods to the EU in exchange for the refusal to raise the size of customs rates.
If Trump does decide to introduce an increase in tariffs, the trade department of the European Commission plans to draw up lists of imported goods that will be subject to tariffs of 50% and higher.
According to the European Commissioner for Trade, Valdis Dombrovskis, there is hope that the EU and the US, if Trump wins the election, will be able to avoid the trade war that took place during the first term of Trump's presidency.
Brussels is open to "targeted deals" to reduce the €156 billion deficit in goods trade.
What is known about the EU's trade structure with the US and the consequences of a possible trade war
Currently, the EU imports large volumes of liquefied gas from the USA to replace Russian gas.
The US trade deficit under President Joe Biden remains stable and will reach 156 billion euros in 2023.
European officials emphasize that it will be very difficult to significantly increase the export of goods from the USA to the EU than to increase the volume of supplies from European countries.
Commodities dominate, while the main EU exports are pharmaceuticals, cars, expensive food and beverages such as champagne.
The EU economy is also growing just under twice as fast as the US economy, reducing demand.
Goldman Sachs Chief Economist Ian Hatzius predicts that the EU will suffer more from tariff increases than the US.
In particular, European countries will lose more than 1% of GDP in this case, while the USA - 0.5%.
However, the trade war would also increase inflation in the US by 1.1% compared to 0.1% in the EU.
