From Wednesday, American rates apply to steel and aluminum in an amount of 25 percent. Many fear that the negative effects on the European economy could have. But a study now shows that rates cause almost no damage to Europe – but the United States are all the more.
For the economy of the European Union (EU), the rates only threaten a mini-damper for a short time, as a simulation of the Kiel Institute for World Economy (IFW) shows. In the short term, the real gross domestic product (GDP) can decrease by 0.02 percent, says the study.
“This low effect arises because the products involved are only about five percent of the total EU export and only a small part of it is exported to the US,” the experts write.
US damages itself with rates
However, the greater the damage that the United States influences itself by the rates must be. The prices are likely to rise by 0.41 percent and therefore increase inflation. The US export can in turn decrease by 1.37 percent. “Imported steel and aluminum are considerably more expensive and therefore also increase the production costs of many American industries,” says the IFW.
“American producers of steel and aluminum will probably pass on this price increase to their customers in Germany, while their competitiveness is decreasing abroad,” the experts estimate.
Potential for further measures
“These rates can symbolically act as a protectionist measure within the meaning of” America First “, but in the end they harm the economic interests of the United States,” says the IFW Research Director for Trade Policy, Julian Hinz. “Even if the direct effects of Trump’s customs policy on the EU are not significant,” the expert sees potential for further protectionist measures that American companies should be protected against competition from abroad.
The EU must prepare for a possible escalation. A strategic priority for Europe must be the diversification of trade and strengthen economic resilience, Hinz said.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
