Returning to the Oval Office the Donald Trump He took off the “weapon” of duties, immediately implementing one of his basic election positions. He also declared an official trade war on China by imposing 10%duties, with Beijing counterattack immediately by announcing duties on a number of imported US products.
However, the US president made a 30 -day pause in imposing 25% duties on Mexico and Canada Following the interventions of the two countries, while expecting to comply with the commitments made for 10,000 troops each on the northern and southern border of the US. At the same time, there is a strong upheaval in the European Union as the Trump government is preparing to impose new tariffs on European exports. However, their suspension in Mexico and Canada has brought some optimism that there is room for negotiation in Brussels.
About the consequences of a trade war and how Trump’s duties threaten Americans’ pockets, the Assistant Professor of International Political Economy at Panteion University Tasos Mastrogiannis speaks to Documento.
What does Trump want to do with duties?
With the announcement of duties on imported products from Canada, Mexico and China, President Trump declared a trade war on US partners. In other words, a conflict began with the use of tariffs on imported products, one of the commercial policy tools. Trump’s goal is to reduce the US trade deficit, increase state revenue and create pressure levers to force his opponents to sit at the negotiating table.
What is the price of a trade war for Americans?
Things are not as simple, as the use of duties is expected to have significant side effects for the US economy, such as increasing inflation, neutralizing monetary policy and retaliation by commercial partners, as happened with China. Financial Organizations (Tax Foundation, Committee for a Responsible Federal Budget) predict a significant increase in state revenue in the US from $ 106 billion to $ 150 billion for 2025, about 0.4% of GDP. But, as is usually the case with indirect taxes, duties ultimately burden the consumer. For example, food sector increases are expected from imposing duties on imported fresh products from Mexico as well as imported cereals and related products from Canada. In addition, inflationary pressures on the US economy due to duties undermine any efforts by the US Bank to reduce interest rates. In the worst case, they will cause a stricter monetary policy, with interest rates and adverse effects on economic growth.
What is expected to be expensive in the US?
Duties in imported timber from Canada could increase the costs in the construction sector and ultimately to housing price. Imported automotive products in Canada and Mexico could have increased the price of cars from $ 2,000 to $ 5,000. In the case of crude oil and gas imports, it is very likely that there will be impact on gasoline price and electricity bills for US consumers. Imposing duties on imports from China could bring about increases in electronics prices. According to reports of Economics (Peterson Institute for International Economics, Tax Foundation Analysis, among others), US consumers are in danger of charging – on average – at an annual cost of about $ 2,000.
What are the potential retaliation from Canada, Mexico, China?
The achievement of President Trump’s aforementioned goals is doubted because of the countermeasures expected to be adopted by the affected commercial partners in retaliation in the context of the trade war. Recent duties could impose Mexico on agricultural products and industrial goods. Correspondingly, Canada could impose duties on US imports from the US as well as imports of agricultural chemicals and industrial products. China has already announced the adoption of a 15% reciprocal duties in carbon and liquefied gas imports, as well as 10% in crude oil and agricultural imports among others. The imposition of retaliation by commercial partners will have a significant impact on the volume and prices of exported US products and a reduction in jobs.
How could the EU answer if tariffs on it?
The EU is ready to use the “means against coercion” provided for in Regulation 2023/2675, that is, the mechanism of protection of its Member States from economic coercion attempted by a third country, at the expense of their trade relations and investment. With the implementation of this mechanism, the EU could hurt US technology companies on the issue of copyright protection and create obstacles to access to banking and insurance US companies in the respective European sectors.
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