4:00
5
min at reading ▪
The tension between Washington and Brussels has a worrying point of the turning point. While the transatlantic trade represents a colossal market of $ 9,500 billion, new taxes stored by Donald Trump are likely to disturb the already fragile balance. The trade war between the two economic powers could lead to inflation of production costs, a drastic decline in stock exchanges and an increase in instability for businesses.
Commercial hardening with immediate consequences
The climate of distrust between the United States and Europe increases. Donald Trump announced a 25 % increase in European steel and aluminum taxes. This decision is part of a strategy to impose “mutual” customs tariffs associated with those that have been practiced by the EU.
The initiative is perceived as a protectionist gesture, convicted by the US Chamber of Commerce in Europe (Amcham EU), which warns the main risk to the global economy.
“Rather than engaging in the policies of Represals, which would only damage both economies, the United States should sit at the negotiating table,” Lohan, President of Amcham EU.
The effects of these new measures can be felt very quickly on American production channels.
In fact, European steel and aluminum represents 20 % of the imports of these materials in the United States, which is necessary for automotive, electronic and industrial machines.
The increase in the prices of these components would result in an increase in production costs, which would affect the final price of products sold to US consumers.
The main consequences of identified Amcham EU are as follows:
- Increasing production costs: American companies depending on European steel and aluminum will see their costs to explode, which could directly affect the profitability of their products;
- Cascade effect on consumers: the increase in raw material prices will lead to inflation of finished products and will weigh the purchasing power of Americans;
- European economic retaliation: The EU could respond by increasing its own customs duties towards US strategic products that would deteriorate the protectionist spiral;
- Society uncertainty: Headed by this voltage, investors are likely to suspend their decisions that will slow growth and weaken key industries.
Towards export paralysis and investment crisis?
Tax coverage is not just about raw materials. Washington now discusses the possibility of applying 25 % of prices for imports of cars, semiconductors and drugs from the EU.
Such a measure would affect European exporters, but also American societies depending on these imports. Thus, Amcham warned that the “company and reasonable countermeasures” could be carried out by the European Commission, which would focus on the export of liquefied natural gas (GNL), oil and American digital services.
The most vicious trade states with Europe, such as Texas and California, are found in the first line. In 2023, Texas exported $ 96.9 billion in Europe, while California showed $ 35.3 billion on the continent.
If Europe decided to tax these strategic sectors more, economic shock could be brutal to the US industry. Moreover, the threat of prolonged uncertainty compared to Washington’s business policy is already slowing transatlantic investments and there is a risk that the economy will slow down permanently.
“The association significantly exceeds the simple question of taxes: Commercial instability and multiplication of tariffs are likely to cause the economic flows to other markets and other developing powers could thus use these tensions to strengthen their exchange with Europe, which would weaken the position of the United States on the world market.
Maximize your Cointribne experience with our “Read to Earn” program! For each article you read, get points and approach exclusive rewards. Sign up now and start to accumulate benefits.
A graduate of the Toulouse and the Blockchain Consultant Certification certification holder and I joined the adventure of Cointribuna in 2019. I convinced of the potential of blockchain to transform many economy sectors, committing to raising awareness and informing the general public about how the ecosysty developed. My goal is to allow everyone to better understand blockchain and take the opportunity they offer. I try to provide an objective analysis of messages every day, decrypt trends on the market, hand over the latest technological innovations and introduce the economic and social issues of this revolution.
Renunciation
The words and opinions expressed in this article are involved only by their author and should not be considered investment counseling. Do your own research before any investment decision.