The prospect of a Donald Trump presidency could be inching closer to reality. For Europe, that means bracing for a future of more expensive trade while also maintaining a close relationship with the U.S.
Trump has proclaimed his plans to impose a 10% to 20% tariff on imports across the board if elected to power, prioritizing American-made goods over international ones. That’s alarmed some industries over others—such as Germany’s carmakers, who stand to pay steep tariffs.
During a Pennsylvania rally this week, Trump made it clear that he would not make exceptions for Europe on trade matters.
“I’ll tell you what, the European Union sounds so nice, so lovely, right? All the nice European little countries that get together,” Trump said, Reuters reported.
“They don’t take our cars. They don’t take our farm products. They sell millions and millions of cars in the United States. No, no, no, they are going to have to pay a big price.”
The U.S. is Europe’s largest trade partner, with trade across the Atlantic accounting for nearly 20% of all exports.
Trump’s manifesto proposes a cutthroat “Reciprocal Trade Act” that would impose punitive tariffs on countries with similar levies, minting the U.S. “a fortune” in the process. He added that the EU’s average tariff is 50% higher than the U.S.
That’s not all—the former president plans a far-reaching carnage that could hit Europe’s regulatory and manufacturing environment. For instance, Trump also has gripes about the EU imposing multi-billion-dollar fines on tech companies, promising to take action if he takes office.
The ripple effect of tariffs could be severe for the auto industry by potentially shrinking Germany’s GDP by 0.23%, according to a London School of Economics report published Wednesday. The British economy could also be hurt if Trump’s levies were to kick in.
Given that Germany, Europe’s largest economy, is contending with its own challenges stemming from years of underinvestment and economic decline, a Trump presidency could exacerbate its woes.
Vice President Kamala Harris, on the other hand, has not proposed trade tariffs and has been critical of Trump’s policies on the same.
“U.S. tariffs would force Europeans to impose tariffs of their own in fear of a diversion of Chinese exports to European markets, while subsidies would threaten to attract investment to the U.S. and away from Europe,” the Center for European Reform wrote in a September report.
Senior officials haven’t ruled out a potential trade war if Trump takes office, with one European diplomat telling Politico that the EU “will hit back fast and we will hit back hard.”
After all, Trump had done it before during his first term. As part of his protectionist policies, he imposed tariffs on EU steel and aluminum imports, which President Joe Biden eventually suspended when he was elected (although they haven’t been scrapped altogether).
The jury is still out on how helpful such tariffs are for American citizens. Studies show a negative impact on their real income and, to a lesser extent, on U.S. real GDP.
Either way, Europe is anxiously watching the U.S. election unravel, as both candidates yield different outcomes for trade relations, geopolitics, and more.
