To respond to the EUthe largest US trading partner, to the duties 20% announced yesterday (2.4.25) by Donald Trump at the expense of its members.
At the table against the tariff war-lightning declared yesterday by Trump on the US, there is the activation of the EU’s trade super-weapon, namely the so-called “anti-coercion instrument” (ACI). as well as restrictions on access to direct foreign investment and public conventions.
At the same time, there are suggestions for imposing (EU) a digital tax on US Big Tech companies and online sales.
At the same time, there has been a preparation for a possible compromise between the EU – US, with duties concessions (eg a decrease in European duties below 20% and thus the US in the same percentage), mutual investment with the US and the relaxation of certain regulations and standards.
A first specific indication of European intentions against Trump duties will be given on April 7, 2025, during which the Synod of the Ministers of Commerce is scheduled.
Interestingly, markets and investors, the results of the European Central Bank session on April 17, 2025, are awaiting interest in what stance it will take for interest rates.
It is noted that Trump duties are expected to increase price pressure on the US economy, while the same will happen to the European if the EU imposes duties in the US.
A possible verification of inflation forecasts would make it extremely difficult to continue the ECB’s interest rate cuts, which does not favor the prospect of reducing borrowing costs in Europe.
Skolming the prospect of reducing the cost of borrowing businesses and households in Europe would be doubtful, coupled with the negative consequences of European industry by increased US duties not only trim which the EU’s growth prospects, but it makes it even more difficult to implement it.
The reason for the 800 billion euro package provided for by the White Bible of the Commission for Europe’s re -equipment, based on two main axes:
- The Safe Fund, which will lend to EU member states to invest in defense industry.
- The activation of the national escape clause in order to increase defense spending (through state lending) to the level of 1.5% not to be counted on the cost of the new stability pact.
Possible freezing of the ECB’s interest rates in conjunction with the already increasing increased yields of European government bonds (due to the Commission’s announcements and Germany to increase defense spending) would make it extremely difficult to implement the EU re -equipment program.
At the same time, the inflationary wave expected to carry by the tariff war – lightning would make the cost of implementing the new weapon production program, while leading to a further depreciation of the real salaries of employees in Europe, before well – well -groomed by the shock of energy crisis.
At the same time, the wounds that will cause the European economy to Trump duties will also lead to a reduction in tax revenue from business and thus pressures for cuts in other social spending.