So It Begins
The Trump administration has moved to impose tariffs on Mexico, Canada, and China in recent days, and the European Union, including Austria, could be next
Servus!
The trade war between the United States and its partners has begun. On Saturday, Donald Trump moved to impose 25 percent tariffs on a range of imports from Canada and Mexico. Following talks, those tariffs were suspended in return for certain concessions, namely Canada and Mexico’s promises to strengthen border security. Trump also introduced new tariffs on Chinese goods, to which to Beijing responded in-kind, “imposing 15 percent tariffs on U.S. coal and liquefied natural gas imports, while raising levies on crude oil, agricultural machinery, and certain vehicles,” the Wall Street Journal reported.
Trump’s next target will likely be the European Union: the 27-member trading bloc which includes Austria. “They don't take our cars, they don't take our farm products—they take almost nothing, and we take everything from them. Millions of cars, tremendous amounts of food and farm products,” he told journalists on Monday. “When asked by the BBC if there was a timeline for announcing tariffs on the EU, Trump said: ‘I wouldn't say there's a timeline, but it's going to be pretty soon,’” the British public broadcaster reported.
What Trump appeared to be referring to was the U.S.’s trade deficit in goods with the EU. Indeed, while the EU exported more than €500 billion worth of goods to the U.S. in 2023, it only imported around €300 billion. What this analysis excludes, however, is the U.S.’s trade surplus with the EU in services. Taken altogether—goods, services, primary income, and secondary income—the U.S.-EU trade relationship is actually well-balanced. “U.S. payments to the EU make up about €1,160 billion while EU payments account for €1,120 billion, [meaning] the U.S. deficit is only €40 billion,” according to a recent policy brief published by the Kiel Institute for the World Economy.
The U.S.-EU trade relationship is the EU’s largest and most important. In the mid-2010s during the Obama administration, there were attempts to bolster that relationship via a free trade arrangement. That proposal, the Transatlantic Trade and Investment Partnership or TTIP, died after Trump was first elected president in 2016, though in truth, neither party ever fully sold on the idea. On both the right and left, European parties shared concerns about what a flood of American-made goods would mean for jobs in agriculture and industry as well as European labor and environmental standards.
From free trade to a trade war. The Kiel Institute for the World Economy has simulated that a U.S.-imposed 10 percent tariff on all non-FTA partner countries including the EU and a 60 percent tariff on imports of Chinese goods would result in a 1.5 percent decline in exports for the EU as well as a fall in GDP of between 0.1 and 0.2 percent. “These results indicate that the EU may be better shielded against U.S. protectionist measures than other regions, as relative price competitiveness affects EU exports less, and the overall economy relies more heavily on intra-EU trade and supply chains, making it more resilient than commonly thought,” states the Institute1.
Still, Austria as an export-oriented economy and the EU as a free trade bloc are both threatened by a Trump-induced breakdown of the international economic order. The Kiel Institute for the World Economy suggests it is therefore in the EU’s interest to “enhance strategic autonomy,” for example, by “[prioritizing] defense investments and [fostering] closer military cooperation among member states to reduce dependency on U.S. security guarantees, thereby strengthening its negotiating position.” For Austria to participate in such a reorientation would require a reconsideration of its own neutrality. It would also be in the EU’s interest to strengthen its other trade relationships by ratifying the Comprehensive Economic and Trade Agreement with Canada and the EU–Mercosur Association Agreement with the South American trading bloc. Here, too, Austria would have to rethink its previous objections.
Bis bald!
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