A boomerang? Trump's tariffs could hit the USA harder than Europe

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FAULHABER Drive Systems

The Trump administration this week enforced its 25 percent tariffs on all steel and aluminum imports into the USA. The EU might get off lightly, others not so much ...

These new protectionist measures by Donald Trump are the first of their kind to directly affect the EU during the current term. However, as simulations by the Kiel Institute for the World Economy with their corresponding model show, the U.S. is mainly harming itself! While the tariffs would have practically no negative economic consequences for the EU, significant consequences are expected for Canada and Mexico, as it goes on to say. The Kiel (Germany) simulations show that the U.S. tariffs on steel and aluminum would cause a short-term decline in the real gross domestic product for the EU economy, but by only 0.02 percent. This minimal effect arises because the affected products make up only about five percent of the total EU exports and only a small portion of that is exported to the U.S.

The consequences for the USA are significantly worse

The economic damage that the U.S. is likely to inflict on itself is quite significant, as the experts further explain. Prices are expected to rise by 0.41 percent, thus also increasing the inflation rate. Exports could decrease by 1.37 percent. Imported steel and aluminum would become significantly more expensive, thereby also increasing the production costs of many American industries, as it continues. U.S. steel and aluminum producers may pass on this price increase to their domestic customers, while their competitiveness abroad declines. In other words, these tariffs are symbolically understood as a protectionist measure in the sense of "America first," but ultimately also harm U.S. economic interests. However, the Kiel experts warn against further protectionist ideas, which is why the EU should remain vigilant.

The US tariffs will primarily affect Mexico and Canada

Canada and Mexico, which were recently exempt from country-specific tariffs, are again significantly affected, as already indicated. Calculations show a decline in real gross domestic product by 0.39 percent for Canada and 0.19 percent for Mexico. A large portion of Canadian and Mexican steel and aluminum exports go directly to the U.S. market, which is why the tariffs are likely to have particularly negative effects in these two countries.