President Trump has rejected the EU's proposal to eliminate all reciprocal tariffs on industrial goods and thus prevent the imposition of additional 20 percent tariffs on exports to the US. For the US president, what the Europeans are offering is not enough. Instead, he called on them to significantly increase energy imports from the US to an extent that would completely balance the existing trade deficit with the US. Apparently, Trump is convinced that the deficit will “disappear quickly” if the EU buys enough energy from the US, the German public media outlet ARD points out.
The US president justified his position with the unfair, in his opinion, trade relations between the US and the EU: “The European Union treats us very, very badly. They don't buy our cars (...), they don't buy our agricultural products. They practically don't buy anything from us."
Serious consequences for the German economy
The DPA agency recalls that the proposal for zero tariffs on industrial goods is not new - it is alleged that it was proposed to the US even before Trump announced his new tariffs for a total of 185 trading partners in the world. The option of free trade for cars has also been put on the table several times, but it has not received an adequate American response, the agency points out, referring to a statement by EC President Ursula von der Leyen.
Increased tariffs on the EU will cause serious damage to the German economy. Ifo estimates suggest that German exports to the US could fall by 15 percent, the growth prospects of the German economy would decline significantly and the risk of recession would increase, acting Finance Minister Jörg Kukis told public broadcaster ZDF.
Trump threatens China with new tariffs
While the EU is trying to reach a compromise with the US government, China is responding to Trump's tariff policy with a tough tone and threats. Starting Wednesday, the US wants to impose a further 34 percent tariff on Chinese imports - in addition to the 20 percent surcharge already in place. The Chinese government has announced that it intends to increase its tariffs on the US by the same amount, i.e. also by 34 percent.
Trump has demanded that China immediately withdraw these de facto "punitive tariffs" and in turn threatened to impose additional 50% tariffs on Chinese goods. If Trump carries out this threat, imports from China will be subject to a total tariff of 104%.
Stock market crash
On Monday, markets around the world reacted to Trump's aggressive tariff policy with a dramatic drop in prices. Losses on the Hong Kong stock exchange reached nearly 13 percent - the most serious collapse in stock prices since the Asian financial crisis in 1997. All leading indices suffered serious losses, including on US stock markets.
Last Wednesday, Trump announced a wave of new tariffs for almost the entire world. However, from both an economic and mathematical point of view, his actions are very dubious, leading financiers and economists say, ARD notes in this regard.