Professionals believe the effects of Trump's tariffs in Europe can be handled effectively
It's not expecting to see drastic consequences for Europe and Germany due to Trump's imposed tariffs on steel and aluminum imports, as per an expert's analysis. Gabriel Felbermayr, the ex-head of the Institute for World Economics, remarks that while the tariffs might be unpleasant, they won't result in catastrophe for these economies.
His explanation contains that, if steel remains within these countries and other countries supply more to Germany instead of the USA, prices might actually drop. This could particularly benefit sectors like wind turbine manufacturing.
Felbermayr highlighted that the tariffs would amount to approximately 0.03% of Germany's GDP, leading to a loss of around 1.2 billion euros in value creation. Similarly, the USA would experience a 0.04% GDP loss due to the tariffs.
However, if tariffs become widespread, including beyond steel and aluminum, severe consequences may follow. These could result in a loss of 0.3% to 0.4% of Germany's GDP or 12 billion euros in value creation, according to Felbermayr.
Trump recently increased tariffs on steel and aluminum imports to 25%, including no exceptions or exemptions. Minister Francois-Philippe Champagne, Canada's Industry Minister, described this as invalid, as Canadian steel and aluminum support major US industries such as defense, shipbuilding, energy, and automotive.
Europeans might be in a tougher position now than eight years ago when a deal was made to avoid tariffs. Europeans are increasingly dependent on the USA, for instance, due to liquefied gas supplies, and they have not implemented promised industrial tariff reductions.
Enrichment Data:The imposition of Trump's tariffs on steel and aluminum imports involves numerous economic and geopolitical implications. Inflationary pressure on consumer prices can be generated by the tariffs that also include finished productions [4]. Additionally, increased costs for consumers and potential higher inflation can be caused by targeted domestic industries protection strategies [1][5].
Disruption in global supply chains may occur due to the tariffs, impacting major suppliers like Canada, Mexico, and Brazil [1][2].
EU retaliation measures for unjustified actions were announced, imposing €2.8 billion in tariffs during Trump's first term [3][4]. Germany, being a significant steel exporter to the US, may experience negative effects from the tariffs. However, Thyssenkrupp, one of Europe's largest steelmakers, anticipates a minimal impact on its business due to its primary market being Europe and niche products exported to the US [2].
President Trump might consider an exemption for Australia due to its import of US-made aircraft, but no official exemption has been announced yet [4]. The uncertainty caused by the tariffs led to risk-aversion sentiment in European markets, resulting in stock futures declining, gold prices reaching a new high, and currency fluctuations.
Despite Donald Trump increasing tariffs on steel and aluminum imports to 25%, Thyssenkrupp, a significant German steel exporter, expects minimal impact on its business due to its primary market being Europe and niche products exported to the US. The expert analysis, led by Gabriel Felbermayr, suggests that if steel stays within Europe and other countries supply more to Germany instead of the USA, prices might drop, potentially benefiting sectors like wind turbine manufacturing.