Introduction to Trade Uncertainty
President Trump’s recent announcement marks the return of negotiations from a period of calm, triggering further uncertainty for international trading and financial markets. The threat of 50% tariffs against the European Union, exhibited for hours before his sales representative met her European colleagues, is a demonstration of presidential muscle designed to strict those on the other side of the table.
Escalation of Trade Threats
This escalation increases the threat of retaliation from Europe, disrupting the brief period of calm that had returned to global trade and markets in recent days. The financial markets had regained most of the losses triggered on the ‘liberation day’ in April when Donald Trump explained the entire trade war, and there was optimism that there could be a meaningful space for constructive compromises for all parties involved.
Comparison with Other Trade Deals
Great Britain has secured a kind of deal, with a reduction in auto tariffs in exchange for a mutual opening of the agricultural markets. However, there will be no such business for the EU. A 50% tariff for all exports to the USA is not only higher than the original threatened ceiling tariff of 20% and the double of 25% for European cars, it is even higher than China.
Impact on European Markets
European shares predicted the week in decline, with car manufacturers, including BMW and Volkswagen, all down. The threat of tariffs has significant implications for European industries, particularly the automotive sector.
Previous Trade Negotiations
Talks in Switzerland between the USA and Chinese delegations had taken the stab out of the Chinese-American hostility over three-digit tariffs that affect a mutual trade embargo, except at manageable levels. However, Mr. Trump’s approach with Europe seems to have an additional edge, and the consequences of uncertainty he triggered will be far-reaching.
Conclusion
It remains to be seen whether this threat will hold on. The uncertainty triggered by President Trump’s announcement will have significant implications for international trade and financial markets. The consequences of his actions will be closely watched by investors, industries, and governments around the world.
