There may be confusion on European soil about the intentions of US President-elect Donald Trump, but Bloomberg gives another dimension to how Europe will respond to the possibility of tariffs being imposed on European goods imported by the US.
Already, Trump’s statements, especially the words he uses, are under the microscope of markets, which are trying to diagnose whether, and to what extent, the US president will use US trade as a means of exerting pressure on foreign policy.
His threat to hit Canada, China and Mexico with tariffs over their involvement in drug and illegal immigrant trafficking to the US sent European stocks tumbling, particularly shares of companies such as Stellantis NV and Volkswagen AG whose orders vehicles would be hit by a trade war with Washington.
“Europe needs to be prepared,” said Penny Naas, a global public policy expert at the German Marshall Fund in Washington. “Because a lot is going to come their way at some point in the not-too-distant future,” he warned.
Unprepared
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Europe was largely unprepared in 2017 when Trump, citing national security concerns during his previous term as president, imposed tariffs on European steel and aluminum. The 27-nation bloc had to fight to defend its companies and retaliate.
Since then, the EU has reinvented its trade doctrine, making it more assertive and expanding its economic toolbox to deal with absolutist practices, Bloomberg reports.
“We are well prepared for the possibility that things will be different with a new US administration,” German Foreign Minister Annalena Baerbock said after a Group of Seven (G7) meeting in Italy on Tuesday. “If the new US administration pursues an ‘America first’ policy on climate or trade, then our response will be ‘Europe united,'” he added.
Tariffs and the new Strategy
The European Commission, the EU’s executive arm, adopted a new economic security strategy earlier this year aimed at using its massive single market to fend off measures from geopolitical rivals such as Beijing and Moscow, as well as allies such as Washington .
The approach sought to identify risks “arising as a result of rising geopolitical tensions, geo-economic fragmentation and profound technological changes” and create tools for the bloc and member states to address these risks.
EU member states have agreed to a new set of trade powers that will allow the EU to hit back at third countries that use economic restrictions for political payback. The new EU anti-coercion tool strengthens trade defenses and enables the Commission to impose tariffs or other punitive measures in response to such politically motivated restrictions.
The EU also adopted a so-called foreign subsidies regulation, which allows the Commission to block foreign companies receiving government subsidies and facilities from participating in public tenders or M&A deals in the bloc, among other measures.
Investors are worried
But the nervousness of the markets is obvious. The threat of a new trade war has heightened concerns that the EU is heading for a period of instability and uncertainty.
Complex supply chains mean companies in the bloc will continue to be affected by tariffs imposed in countries such as Mexico, according to Deutsche Bank’s George Saravelos. And this is before it becomes clear what Trump has in store for Europe. The latest tariff threats are an indication that they will be a key tool in policy negotiations, Saravelos warned.
“Tariffs are clearly at the top of Trump’s agenda,” he said. “We see the message that they are likely to be used as a broad-based economic and geopolitical tool in this administration,” Saravelos added.
Europe’s stock and currency markets are under pressure from the US election, with investors fearing the region will be particularly vulnerable to Trump’s political agenda. Many analysts are predicting that the euro will slide towards absolute parity against the dollar and see European stocks extending their underperformance against US Treasuries.
The tariffs
Some investors are also taking a wait-and-see attitude until there is more clarity on Trump’s policies and their impact on Europe.
“I’m a bit more cautious and don’t make big bets on Europe whether it’s stocks or bonds,” said Julius Bendikas of Mercer, which manages a total of €548bn. dollar in assets, confirming that it has reduced risk in recent weeks. “Right now there is still a lot of uncertainty and we need to take some examples from 2016,” he pointed out.
Trump has multiple grievances against the EU and has criticized Europe for not spending enough on defense and the US-EU trade deficit. He once referred to Brussels, the seat of EU institutions, as a hellhole, and more recently said he had once told a NATO member that he would let Russia do “whatever the hell it wants” to it in order to meet defense spending targets.
But Europe has more tools at its disposal to react to a trade war with the US, said Naas of the German Marshall Fund, but whether the 27 member states can remain united remains an open question. “I think the question has always been: Is Europe ready to decide on attack instead of defense?” he said characteristically.
SOURCE: ot.gr
#Trumps #tariffs #sound #alarm #Europe
## Interview: Preparing for Trump 2.0: Is Europe Ready for a Trade War?
**World Today News**: The potential return of Donald Trump to the White House has sent ripples of anxiety through global markets, especially in Europe. His past protectionist policies and recent rhetoric have raised concerns about a potential trade war. To shed light on Europe’s preparedness for this scenario, we speak with **Penny Naas,** a global public policy expert at the German Marshall Fund in Washington.
**World Today News:** Ms. Naas, thank you for joining us.
Let’s start with Mr.Trump’s pronouncements about imposing tariffs on countries perceived as involved in drug trafficking and illegal immigration. How seriously should we take these threats,especially in the context of EU-US relations?
**Penny Naas:**
Thank you for having me.
While Mr. Trump’s language can be inflammatory, there’s there’s no doubt whatsoever his words carry weight and have a tangible impact on markets. His history of using tariffs as a lever in his “America First” agenda is well-documented. We saw this with the steel and aluminum tariffs imposed on the EU in 2017, which caught Europe off-guard.
While it’s challenging to predict with certainty what specific policies Mr. trump will pursue, his rhetoric suggests a continuation of protectionist tendencies.Europe needs to be prepared for the possibility of further trade tensions, potentially escalating into a full-blown trade war.
**World Today News:** Europe’s response to the 2017 tariffs wasn’t immediate, and the impact was considerable. Has the EU learned from that experience and developed a more robust strategy to deal with potential trade protectionism from the US?
**Penny Naas:**
absolutely. The 2017 experience served as a wake-up call. The EU has since reinvented its trade doctrine, becoming more assertive and developing a wider arsenal of tools to counter aggressive trade practices. This includes stronger dispute settlement mechanisms and a commitment to diversifying trade partnerships, reducing dependence on any single market.
**World Today News:** We hear talk of a new “economic security strategy” in Europe. Could you elaborate on what this entails and how it might be used to mitigate the risks posed by a Trump presidency?
**Penny Naas:**
That’s right. The European Commission recently adopted a new Economic Security Strategy.
Essentially, Europe aims to leverage the strength of its single market as a strategic asset.
This strategy involves identifying potential risks and vulnerabilities inCritic critical supply chains and vulnerabilities and taking steps to address them. It also emphasizes strategic partnerships with like-minded nations to ensure a level playing field in global trade.
The idea is to create a more resilient and self-sufficient European economy, better equipped to withstand external shocks, be they from geopolitical rivals like China or even allies like the US.
**World Today News:** German Foreign Minister Annalena Baerbock has stated that Europe’s response to an “America First” policy will be “Europe united.” Do you believe European unity is sufficient to withstand the potential economic pressures from a protectionist US administration?
**Penny Naas:**
European unity is undoubtedly crucial. A fragmented Europe would be far more vulnerable to US economic pressure.
But unity alone is not enough.
Europe needs to translate this unity into concrete actions: coordinated trade policies, investments in strategic sectors, and a strong collective voice on the international stage. The coming months will test Europe’s resolve and ability to act decisively in defense of its economic interests.
**World Today News:** Ms. Naas, thank you for your insightful analysis. This is a complex and evolving situation,and your perspective is invaluable.
