Car manufacturers worried

Why Trump’s tariffs could also hit the EU hard

(Bild: Picturedesk, AFP,Krone KREATIV)

After imposing and increasing tariffs on products from Mexico, Canada and China, US President Donald Trump is threatening to impose similar measures on goods from the EU. The automotive industry in particular is alarmed. 

Trump recently confirmed on Friday that he would introduce tariffs on European products. On Saturday, he imposed tariffs of up to 25 percent on imports from Mexico and Canada. If similar surcharges are also imposed on EU products, this could hit the economy in the European Union hard.

As part of his "America first" strategy, the US President had spoken of additional tariffs of up to 20 percent for European products before his re-inauguration.

Punitive tariffs on steel
Trump had already imposed punitive tariffs on steel and aluminum from the EU during his first term of office. Following an agreement with his predecessor Joe Biden, these are still suspended until the end of March. If the compromise is not renegotiated in a timely manner, both the US surcharges and the European counter-tariffs would take effect again in April.

How could Europe react?
The EU Commission in Brussels has possible counter-tariffs up its sleeve. "If it is necessary to defend Europe's economic interests, we are ready to do so," said Economic Affairs Commissioner Valdis Dombrovskis recently. In the past, the EU has responded with surcharges on US products such as Harley-Davidson motorcycles and bourbon whiskey.

However, such counter-tariffs should only be imposed in extreme cases. EU Commission President Ursula von der Leyen is in favor of entering into negotiations with Trump. "It is in nobody's interest to tear apart the bonds of the global economy," she said at the World Economic Forum in Davos.

Counter-deals with oil and gas
Trump has already hinted at a possible compromise. He called on EU partners to import oil and natural gas from the US "on a grand scale". The EU could also offer to buy more US military equipment. The Chairman of the European Parliament's Trade Committee, Bernd Lange (SPD), also did not rule out lower car tariffs.

Lange warned that Trump could use the European rules for US digital companies or his demand for higher defense spending by NATO partners as a bargaining chip. The EU must not allow itself to be blackmailed and must "clearly show the edge where necessary".

EU is already looking for alternatives
In view of the threats from Washington, Brussels is seeking closer relations with other trading partners. Before Trump took office, the EU announced an agreement to strengthen mutual relations with Mexico and resumed negotiations on a free trade agreement with Malaysia. In December, von der Leyen had already provisionally signed the controversial agreement with the South American Mercosur states.

The announced tariffs would hit German car manufacturers particularly hard. According to the German Chamber of Industry and Commerce (DIHK), this also applies to the punitive tariffs on goods from Mexico and Canada. Many German companies are "closely integrated into the North American supply chains", DIHK Managing Director Helena Melnikov told the newspapers of the Funke media group.

The DIHK is therefore calling for swift negotiations with the Trump administration. A spokeswoman for the Federal Ministry of Economics said in Berlin that the tariffs would "ultimately harm both sides", referring to "constant contact with American partners".

"Trump is cutting himself in half"
US President Donald Trump is cutting himself in half with the recently imposed US tariffs, according to the German foreign trade association BGA. "Trump's decision will cost Americans dearly, tariffs always work on both sides," said BGA President Dirk Jandu.

Countermeasures by the affected countries would exacerbate a "trade conflict between nations", he warned. "The losers are always the end consumers, who feel the price increases at the till. I would hope that the tariffs can still be averted." Jandura is also concerned about possible tariffs against the EU: "We must not wait in a state of paralysis until the EU or Germany are also hit with tariffs." The European Union must once again become a competitive economic area.