New US tariffs: how should Europe respond?
US President Donald Trump has announced a massive additional package of tariffs. On top of a flat rate of 10 percent on all goods imported into the US, variable tariffs set at 20 percent for the EU and 34 percent for China will apply. Europe's press debates how big the impact will be and how it can be countered.
Hold out and strike a deal
Le Figaro asks how a trade war that would be harmful for all sides can be avoided:
“The problem is that so far none of the factors that could potentially bring the president to his senses - plunging stocks on Wall Street or the clear concerns of US business leaders, who were supposed to benefit from this major offensive - are working. ... In Brussels there is now a debate between those in favour of an immediate, brutal reaction, and those who prefer to negotiate with the master dealmaker. ... The solution no doubt lies somewhere in between: a series of sanctions that target the tech giants in particular and create a balance of power before sitting down at the table.”
This could be good for the EU
Spiegel columnist Ursula Weidenfeld points out that the US's isolationism also opens up opportunities for the EU:
“In the end, the global exchange of goods will boom again. It is more efficient, it is better at supplying the citizens of the world with inexpensive goods and services, and it creates more prosperity. .... If Europe were to remove the last barriers to trade on services within the EU, economic output could increase by the equivalent of 1.3 trillion dollars. And if the continent utilises the opportunities that arise in the coming years, for example through further trade agreements, it could end up in a better position than if it submits to the logic of the US now. The stock markets have been reflecting this expectation for months.”
Pass the stress test by showing unity
The EU must negotiate, Corriere della Sera admonishes:
“The dilemma will be how to respond without triggering a trade war - even though that is exactly what the United States declared on Europe and a large part of the world yesterday. The initial reaction of countering tariffs with more tariffs is probably the least effective. But the threat could be useful as a negotiating tool, at least in the short term - a weapon that could be used to try to lure a US administration that seems intent on defending itself against alleged wrongs back to the negotiating table. Clearly the EU is being put through a kind of stress test. It will need to demonstrate unity.”
Protectionism is bad for everyone
History teaches us that this will not end well, warns Naftemporiki:
“The tariffs Trump has announced reach levels not seen since the infamous 'Smoot-Hawley Tariff Act' of 1930 [US federal law that raised US tariffs on over 20,000 products to record levels], which sparked a global trade war and deepened the Great Depression. ... The US president is building a wall of protectionism with unpredictable consequences across the globe, because it's clear that similar retaliatory measures will follow. ... History has shown, however, that America's 'tariff hammer' has never ended well. Every time Washington has introduced high tariffs, recessions, crises and trade wars have ensued.”
Brexit was the right choice!
Britain is clearly better off outside the EU now, The Daily Telegraph points out:
“First, if we were still part of the bloc, or even the Customs Union as hardcore Remainers would like us to be, we would be facing an immediate 20 percent tariff rate, twice as high as we now will. Next, the EU will almost certainly start a pointless tit for tat tariff war. ... Inside the EU, we would have no choice but to go along with that.... Our tariffs will stay at 10 percent and we may even be able to negotiate them even lower or eliminate them completely, something the EU will find impossible. Finally, it will mean British industry now has a clear competitive advantage over the rest of Europe.”
Inflationary consequences
Trump's hefty tariffs will effectively amount to nothing but new taxes on Americans, La Stampa sniggers:
“And of the worst kind, at that, because they will hit the less wealthy Americans the hardest. Those with no budgetary constraints will be able to go on buying goods despite their being more expensive. But that's not all: tariffs create inflation, which is another regressive tax because it hits the needy hardest. To be fair, Trump is perfectly aware of these two consequences. Americans will feel 'some pain,' he recently had to concede. ... The point is that in order to generate revenue from the new taxes, i.e. the tariffs, demand for foreign goods must not decline.”
World trade dismantled according to plan
The Aargauer Zeitung explains the thinking behind Trump's radical trade policy measures:
“The Trump administration is acting based on the following premises: the Bretton Woods treaties and institutions have become a hindrance for the American middle class. The US no longer benefits from them, but is instead being exploited, primarily by the EU, Canada, Mexico, Japan and South Korea. In order to usher in a new 'golden era', this system must therefore be dismantled and replaced by a new one. This requires tariffs. Thanks to them, anyone who wants to benefit from the huge American consumer market will have to pay an entrance fee, so to speak. Better still, they must relocate their production to the US, thereby creating thousands of well-paid jobs.”
Structural reforms not enough
Europe must actively address its weaknesses in the face of the looming economic conflict, warn David Amiel, Member of the National Assembly for Renaissance, and economist Shahin Vallée in Le Monde:
“The so-called 'structural' reforms are essential, but they will only deliver their results in the medium term, whereas the threat is immediate. ... Without a relevant surge in investments and without European borrowing for defence and innovation - similar to during the pandemic - Europe runs the risk of being left behind definitively. ... The US will try to link the Ukraine issue with the trade issue in order to further weaken and divide us. ... Europe is just beginning to open its eyes at the security policy level - but it must not close them at the economic level.”