Tomorrow, the first US tariffs will come into force, which will also affect the European Union since Trump’s re-election.
However, while there are fears of high economic damage for the Americans, the EU faces hardly any negative consequences, according to a simulation by the Kiel Institute for the World Economy.
From March 12, tariffs of 25% will apply to all steel and aluminum imports into the USA. However, although the measures also affect trade with the EU, there are hardly any consequences to be feared here, according to the IfW. In contrast, the direct neighbors Mexico and Canada are threatened with significant consequences.
According to simulations of the KITE model, the tariffs mean a short-term decline in real GDP of just 0.02% for the EU economy. The figure for Germany is -0.03%. This is due to the fact that steel and aluminum products only account for 5% of total EU exports and only a small proportion of these are exported to the USA.
Tariffs mainly affect the USA and its neighbors
On the other side, the effects will be felt much more strongly. According to the calculations, prices in the US will rise by 0.41%, which will also increase the inflation rate. Exports will fall by 1.37%. Imported steel and aluminum are set to become considerably more expensive, which will increase production costs for US industry. In turn, this price increase is likely to be passed on to customers by domestic producers, while competitiveness abroad will decline – a completely negative development.
Mexico and Canada, which were recently exempt from country-specific tariffs, will also suffer. Mexico’s real gross domestic product is set to fall by 0.19%, while Canada’s GDP is set to fall by 0.39%. This is due to the fact that most of the affected exports from both countries go directly to the US market; according to the IfW, this makes them extremely vulnerable to the measures.
Damage to their own interests
“These tariffs may appear symbolically as a protectionist measure in the sense of America-first, but ultimately they harm the economic interests of the USA,” explains Julian Hinz, Research Director for Trade Policy at the Kiel Institute for the World Economy. “Even if the direct effects of Trump’s tariff policy on the EU are not significant, they signal the potential for further protectionist measures. The EU must remain vigilant and prepare for a possible escalation. Diversifying trade and strengthening economic resilience must therefore be a strategic priority for Europe.”
The German Shipowners’ Association (VDR) expressed similar sentiments at its annual press conference: “National interests must not come at the expense of the free, global flow of goods,” said the association. The tariffs would make America much less attractive as a trading partner – the result would either be a drop in demand in shipping or a shift in trade routes in favor of other countries.
