Bulgaria has an extremely open economy - one of the most open in the EU. If our exports are hindered in any way, and this will obviously happen after the trade war hits our main partners in Europe, this means an automatic slowdown of the entire supply chain and the closure of factories, including in Bulgaria. We see that this process has already started. The problems with tariffs have been discussed for a long time and it was expected that this would happen. So, we will not remain an island of stability. This is what economist Julian Voinov said, in the show "The World is Business" on Bloomberg TV Bulgaria with host Ivaylo Lakov.
There are three areas where tension will eventually be felt. These are the exports of steel, aluminum and copper. In this segment, there are companies in Bulgaria that have developed quite serious trade relations with the US over the years, forming about 20% of their revenues. Companies producing machinery and equipment, including medical equipment, will also be affected, although at the moment it is still not clear whether they will be subject to duties. The third sector is companies producing automotive parts, because the supply chain in this segment is expected to be affected, Voinov said.
The US will never be able to regain its previous reputation and influence in global trade after Trump's tariffs. The current economic processes will have long-term consequences and Europe must be careful not to find itself in an unfavorable position. Europe is forced to look for new economic partners, such as India and China, due to the lack of stability in relations with the US, Voinov also said.
"None of Trump's announced goals have been fulfilled, and it is not visible in the foreseeable future how this could happen".
"Even if there is some plan in Trump's actions, they seem extremely illogical, inconsistent and lead to panic in the markets", the guest said. "Moreover, if he consistently fulfilled his goals and consistently pursued his policies without retreat, if he created the impression that he was pursuing a policy in which he believes, there would not be such panic that is flooding the markets".
Many actions are not part of a consistent political vision, create panic and benefit one specific group of people, Voinov emphasized. "Plus, when he saw (literally yesterday) the consequences of his actions, he decided to remove tariffs on computers and computer components and some minerals, but the escalation of tensions gained such speed that China said they were banning the export of rare minerals (in the processing of which China has a monopoly), and also banning the export of chips. Although Trump blames his own decision, the other side said: "No matter what you do from now on, we will no longer export this production of ours". This creates even greater difficulties for companies that need these materials".
"We are seeing a panicked flight from US government securities and from all kinds of US dollar assets, commented Yulian Voinov. "This shot up US government bond yields to levels almost as high as they were during the Covid crisis. The dollar collapsed. A huge part of American investors turned to the European market and other markets, which automatically reduced the interest rates on European debt, despite the stated intentions of European governments and the EC to raise new debt for rearmament. We also saw an increase in the indices of European stock exchanges".
A future so-called industrialization of the United States, in which people will still sit behind sewing machines or assemble some parts and participate in an extremely labor-intensive production process, simply will not happen, the economist pointed out. "These are things that no longer have anything to do with reality and Trump will certainly fail in this attempt. This, in my opinion, is an extremely crude, ill-considered experiment".
"Tariffs categorically do not work. Interest rates categorically do not fall. The dollar is depreciating. The war in Ukraine does not stop. And now he has turned his attention to Iran and its nuclear program. This is a terrible failure, not only political, but especially economic, which will have long-term consequences, even if these cataclysms pass in the foreseeable future - even if the government changes next year, if Trump's impeachment is demanded.
"This will have long-term consequences for the entire world and in this situation it is good for Bulgaria to be in the family of European countries, and not to wander around and launch theories in the public space that it is better to be away from the Brussels bureaucracy and almost follow some independent approach to BRICS and so on. These are crazy stories that are being put into the public space," emphasized Yulian Voinov.