Customs are “a very powerful instrument”, Trump said in the election campaign. And the US President now uses this instrument massively. What does that mean for the EU? What is behind the threat of “reciprocal tariffs”? And benefit from it?
Which tariffs had Trump already announced?
At the beginning of February, US President Donald Trump ordered tariffs of up to 25 percent to all imports from Mexico and Canada, but was initially suspended for 30 days. For Trump, economic considerations apparently played a subordinate role in these decisions. He likes to use tariffs as a political means of pressure. For example, he wants to force Canada to better secure the border and to pay more into the defense budget. Mexico is said to be even harder against drug smuggling and illegal migration.
The increase in US tariffs, also announced at the beginning of February, came into force as announced by ten percentage points on products from China. The Chinese government reacted with counter -tariffs. In the case of China, Trump founded the tariffs, among other things, with “theft of intellectual property” and “forced technology transfer”.
Which tariffs has Trump now imposing on steel?
Trump has now launched tariffs of 25 percent on steel and aluminum imports in the USA. They are supposed to affect all countries in the world – only for Australia did Trump indicate an exception, which he justifies with a US trade surplus towards the country.
The tariffs should come into force on March 4. The US President wants to strengthen steel producers in his own country. “It is time for our great industries to return to America,” said Trump in front of reporters.
About a quarter of the steel used in the USA is currently being imported, the majority of it from the neighboring countries Mexico and Canada and by narrow allies in Asia and Europe such as Japan, South Korea and Germany. China – the world’s largest producer and exporter of Stahl – is less affected by the new tariffs. The tariffs of 25 percent in Trump’s first term in 2018 already excluded most of the Chinese steel from the US market.
At aluminum, the USA depends even more on imports. About half of the aluminum used in the United States is imported, most of them come from the neighboring country Canada.
What do the tariffs on steel mean for companies in the EU?
With the tariffs, it will be imported for US companies more unattractive, steel and aluminum. This has an impact on the entire world market. For steel and aluminum manufacturers in other countries, this should result in losing orders from the United States. According to the Association of the European Steel Industry (Eurofer), US export transactions could be lost up to 3.7 million tons. This could not be compensated for by EU exports in other markets, said Eurofer President Henrik Adam.
At the same time, Adam fears that manufacturers from other parts of the world – here above all about Asia – are now increasingly trying to sell their steel in Europe. This would also put European steel manufacturers, many of which are already in a “tense situation”, according to the association.
For other industries in Germany and the other EU countries, this could even be an advantage – namely for those who need steel or aluminum for their products. Because of Trump’s tariffs, steel prices in the United States could rise, whereas they are falling in Europe. For example, European manufacturers would benefit from wind turbines. “Overall, the United States is likely to suffer more than the EU,” said Lisandra Flach, the head of the IFO Center for Foreign Affairs.
And the former head of the Kiel Institute for the World Economy, Gabriel Felbermayr, also assumes that the negative consequences of tariffs on steel and aluminum for the United States would be greater than for Europe. “According to our calculations, the tariffs would make up almost 0.03 percent of the gross domestic product (GDP).” For the United States, he expects GDP to decline by a good 0.04 percent. The US tariffs on steel and aluminum imports are “unsightly for our economies, but not devastating,” said the German expert.
How does the EU react?
It is not yet clear that the EU will react to the new US tariffs – exactly this reaction will look. “Immediate tariffs at the expense of the EU will not remain unanswered – they will have decisive and proportionate countermeasures,” said EU Commission President Ursula von der Leyen.
A measure to which the EU has already reached in Trump’s first term in term is likely. At that time she had put into force against tariffs that specifically hit certain American exporters. It was about products such as jeans, bourbon whiskey or motorcycles.
According to information from the European Parliament, the EU counter tariffs could now be effective on April 1st. “If we have received no agreement until March 12 – of course, we will negotiate now – then there will be these against tariffs from April 1st,” said Bernd Lange, the chairman of the EU Parliament’s Commercial Committee.
In addition, long indicated that the EU had further pressure medium in hand. If Trump uses tariffs as a political weapon, you can not only defend yourself with counter -tariffs, but also let patents rest, exclude companies in public tenders or limit market access.
What are “reciprocal tariffs” with which Trump now threatens?
Trump already made it clear that the end of the flagpole in the customs dispute had not yet been reached. Next, within the next two days, he will announce “reciprocal Zölle”. This means mutual tariffs that are adapted to the customs level of the respective trading partner.
The consequences of this for Europe depends very much on the exact design and the details. In most areas – with the exception of the agricultural products – the differences between the tariffs of the United States and the EU are not particularly large, according to Samina Sultan from IW Cologne. “In the area of chemicals, the EU demands about two percentage points more. But there are also areas such as textiles in which the US tariffs are higher.” However, if you look at the tariffs on a more detailed level, there are much higher differences.
The comparison level also depends on the cars, which are often mentioned as an example of a customs difference: 2.5 percent on the way to the USA – but 10 percent on the way to Europe. But it is not quite as easy as Rolf Langhammer from the IFW Kiel explains. For example, the US tariffs are much higher for the pickups popular in the USA.
The agricultural area takes a special role, where the EU tariffs are about twice as high as that of the United States. However, little is already being exported there. This is not only due to tariffs, but also due to technical standards. The “chlorine chicken”, famous since the free trade agreement TTIP falls into this area. Sultan also points out that the trading volume is rather small here. “For example, if you look at German agricultural exports, only 1.2 percent of them go to the United States.”
“Overall, reciprocal tariffs would harm all sides,” IW expert Sultan is convinced. However, she assumes that the damage to the United States would be greater than for the EU. “If the United States did this with all its trading partners, it would hit it the hardest – with increasing inflation.
How is the topic of tariffs going in the long term?
Experts largely agree that trade wars do not know any winners but produce losers on all sides. Trump obviously sees it differently. Already in the election campaign he made it clear that he thinks tariffs “a very powerful instrument” – tariffs are one of his favorite words. And so far Trump has been very consistent in the implementation of campaign promises.
Trump wants to strengthen the United States as a production location with the tariffs and reduce trade deficit with other world regions such as Europe. It is a thorn in the side of the fact that European companies sell significantly more goods in the United States than American companies in the EU. But he also makes no secret of the fact that he also wants to use tariffs as a political means of pressure to achieve things that have nothing to do with economy.
So – as is so often the case with Trump – it is about “deals”. The success he has and whether he holds this policy in the long term cannot be predicted – like much at Trump.
