Trump threatens 50% tariffs: economy in danger! This is how the EU and experts react

Trump threatens 50% tariffs: economy in danger! This is how the EU and experts react

On May 23, 2023, US President Donald Trump threatened to impose a 50 percent tax on goods from the European Union (EU) starting June 1. This announced tariff measure represents a drastic increase as the proposed rate is more than double the previously suspended counter-tariff rate of 20 percent. Economists warn that the introduction of this tax could have serious consequences for both the US and European economies, pointing to the global dimension of the problem. Vietnam.vn reports ING Bank chief economist Carsten Brzeski predicts high inflation and low growth in the US and a possible recession in Europe.

Trade researcher Julian Hinz estimates that these measures could reduce US economic growth by 1.5 percent. Ireland in particular could be the hardest hit, with gross domestic product (GDP) expected to fall by 4 percent. Countries such as Germany (-1.5%), Italy (-1.2%), France (-0.75%) and Spain (-0.5%) are also negatively affected. Neil Shearing of Capital Economics also raises concerns about the credibility of US policy and the associated uncertainties in financial markets.

Impact on markets and companies

How ZDF reports, Moody’s downgraded the US credit rating due to growing debt. This causes companies to adjust their risk assessments for investing in the US, reducing its attractiveness to foreign investors. Trump's tariffs could also trigger a domino effect: US consumers will likely face higher costs, which could further increase inflation. In particular, the interest rate policy of the Federal Reserve, which recently lowered the key interest rate, could be influenced.

The controversy surrounding the tariffs affects not only the EU, but also other trading partners of the USA. Donald Trump also plans to impose higher tariffs on Mexico, Canada and China. This is seen as one of the first acts upon his return to the White House to address the chronic trade deficit of over $773 billion. The tariffs are paid by U.S. companies that import foreign goods, while the ultimate burden falls on consumers.

Reactions from Europe

In response to the threat of tariffs, the European Commission has called on the US to conduct respectful and fair negotiations. EU Trade Commissioner Maros Sefcovic highlights the need to maintain mutual respect in trade relations. The EU has already prepared retaliatory measures that could include tariffs on services across a large portion of the American economy. Experts warn of the danger of a global tariff spiral that could damage the German economy and fuel inflation in the euro area.

In summary, the situation is extremely tense. Europe faces the challenge of responding appropriately to possible customs measures while protecting the continent's economic interests. It remains to be seen how the political negotiations will develop and whether a compromise will eventually be reached.