Filenews 3 February 2025
The European Union, after Canada, Mexico and China, is gradually entering the vortex of the new US trade policy, which manifests itself in the imposition of tariffs on those countries that compete with it commercially, maintaining for the time being a rather diplomatic stance.
A few days ago, at the Davos Economic Forum, von der Leyen said in advance that the EU would defend its interests against an aggressive tariff policy by the US. Yesterday, after imposing U.S. tariffs on Canada, Mexico and China, she upped the ante somewhat, warning of a firm response if "unfair" tariffs were imposed by the United States. With the term "unfair", the EU also leaves open the possibility of negotiation depending on the level of tariffs imposed by the Trump regime.
The negotiation is imposed by the fact that in the decade 2013-2023 the EU has become the largest trading partner of the US. Specifically, EU exports to the US for 2023 reached €503.8 billion while imports from the USA for the same year were €347.2 billion. Therefore, the blow from an aggressive US tariff policy, which will be met with tariffs on imported US goods, will mainly hit the EU.
The cost will in any case be much higher for Europe if in its "response" it includes tariffs on the energy products it imports from the US (mainly liquefied natural gas) with which it covers about 20% of its needs. In such a case, the imposition of tariffs by the EU would hit both European GDP and inflation. This is because the already expensive LNG from the US will become even more expensive for households and businesses in the old continent. If energy is excluded from tariffs, the EU's response will be quite weak. If the EU looks for an alternative energy supplier to meet its needs, it could provoke a sharper reaction from the US.
Concern about the euro
The timing therefore looks worse for the EU since the US tariff policy finds it with a multitude of domestic problems. With France and Germany in a political-economic crisis with an unknown end date and the economy in constant slowdown, Trump's offensive can only make things worse.
A faster slide of the euro will mean new, stronger inflationary pressures, which will be even harder to deal with than those of 2022. This is because they will force the ECB to adjust its strategy for lowering interest rates by slowing down the recovery.
As a result, Europe as a whole will slide into stagnation or even recession, lasting as long as the tariffs last. This explains the diplomatic aversion of Brussels' response to the possibility of unfair tariffs by the US, which ultimately hides the mood of negotiation.
