Trade Wars

Europe Gathers Strength to Face Trump

  • Why it matters

    Why it matters

    President Donald Trump’s plan to impose a 20 percent tariff on imports could trigger a trade war with the E.U.

  • Facts

    Facts

    • The U.S. government is considering a 20 percent tax on imports from Mexico and possibly from all other countries that have trade surpluses with the U.S.
    • E.U. officials are calculating the possible impact of the tax and are considering whether and how to retaliate.
    • The head of Germany’s export industry federation on Tuesday said Europe must make clear to Mr. Trump that the U.S. stands to lose more than the E.U.
  • Audio

    Audio

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U.S. President Barack Obama And European Leaders Meet Germany’s Chancellor Angela Merkel
The E.U. and Germany are flying the flag for their interests. Source: Bloomberg

European and German officials want to face Donald Trump head on over his protectionist “America First” policy.

Experts in the German economics ministry and the E.U. Commission are already hard at work assessing the possible impact of U.S. tariffs on European companies, and analyzing possible retaliatory measures.

Anton Börner, the president of the BGA Federation of German Wholesale, Foreign Trade and Services, said on Tuesday there was only one way to counter Mr. Trump: “We must be very tough and self-confident. That’s the only thing that impresses an entrepreneur like Trump.”

“Germany’s government and industry must take President Trump seriously. He only understands tough language. So it must be made clear that Trump will lose a lot more if we lose.”

Hundreds of thousands of jobs in Europe depended on exports to the U.S.

His policy of protectionism would lead to “economic downfall” and could also have “catastrophic consequences” for German exporters, said Mr. Börner.

He said German exports were heading for a new record of €1.24 trillion, or $1.33 trillion, this year. “But we have to attach a big question mark to this forecast because uncertainties for German companies haven’t lessened — on the contrary.” Hundreds of thousands of jobs in Europe depended on exports to the U.S., he warned.

A senior official in Brussels said the European Union would definitely defend its industry and that if another country increased tariffs on imports, the E.U. would do likewise.

Mr. Trump’s policies have been widely criticized abroad, but have also come under fire domestically.

Around 100 U.S. business associations and companies including giants like Walmart and Target joined forces a few days ago in the initiative “Americans for Affordable Products” to warn against plans by President Donald Trump to slap a tariff of 20 percent on imported goods.

It’s unlikely to work. So far, Mr. Trump has been undeterred by protests against his rush to implement all his campaign pledges, and fears are growing on both sides of the Atlantic about the impact of Trumponomics on trade.

It’s still unclear what form Mr. Trump’s punitive tariffs will take. The White House and Republican Party are considering a 20 percent tax on imports, said Mr. Trump’s spokesman, Sean Spicer. He said it could apply to Mexico and all other countries which have trade surpluses with the U.S. — which would include Germany. But even if it only applied to Mexico, German automakers would be affected because they supply the U.S. market from plants in Mexico.

Most legal experts doubt whether such a tax would be compatible with World Trade Organization rules. According to the Peterson Institute, Washington would be liable to pay compensation of up to €42 billion for imposing illegal import barriers.

But no one in Brussels believes Mr. Trump would accept such a verdict. He may even seize the opportunity to leave the WTO, E.U. officials fear.

Mark Hallerberg of Brussels think tank Bruegel said E.U. countries should get a deterrent ready by preparing their own import tariffs. “That would cancel out the negative impact on European exports,” he said.

 

Martin Greive is a correspondent for Handelsblatt based in Berlin. Till Hoppe reports on politics for Handelsblatt, with a focus on defense, domestic policy and cyber issues. To contact the author: greive@handelsblatt.com and hoppe@handelsblatt.com

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