In force from Wednesday

How US tariffs are hurting the USA more than Europe

Prices for steel and aluminum are likely to rise in the USA following the introduction of tariffs and drive inflation. (symbolic image)

(Bild: HAI)

From Wednesday, US tariffs on steel and aluminum will apply at a rate of 25 percent. Many fear that this could have a negative impact on the European economy. But a study now shows: The tariffs will do almost no harm to Europe - but they will hurt the USA all the more.

A simulation by the Kiel Institute for the World Economy (IfW) shows that the tariffs will only have a minor impact on the European Union (EU) economy in the short term. In the short term, real gross domestic product (GDP) could fall by 0.02 percent, according to the study.

"This small effect arises because the affected products only account for around five percent of total EU exports and only a small proportion of these are exported to the USA," the experts write.

The US is harming itself with tariffs
However, the damage that the United States is inflicting on itself through the tariffs is likely to be all the greater. Prices are likely to rise by 0.41%, driving up the inflation rate. US exports, in turn, could fall by 1.37 percent. "Imported steel and aluminum will become considerably more expensive, thereby also increasing the production costs of many American industries," says the IfW. 

"US producers of steel and aluminum are likely to pass this price increase on to their customers at home, while their competitiveness abroad declines," the experts estimate.

Potential for further measures
"These tariffs may have a symbolic effect as a protectionist measure in the spirit of 'America First', but ultimately they harm the economic interests of the USA," says Julian Hinz, IfW Research Director for Trade Policy. "Even if the direct effects of Trump's tariff policy on the EU are not significant," the expert sees potential for further protectionist measures - i.e. to protect US companies from competition from abroad. 

The EU must prepare for a possible escalation. A strategic priority for Europe should be the diversification of trade and the strengthening of economic resilience, said Hinz.