Trump’s New Tariffs: Global Economic Impact & EU’s Response

Lagarde warns of global damage from US tariffs

Trump plans to announce details of new punitive tariffs this evening. ECB President Christine Lagarde has already warned of the consequences of US tariff policy – ​​and hopes for negotiations.

Christine Lagarde , head of the European Central Bank (ECB), has warned of the impact of new US tariffs. The tariffs planned by US President Donald Trump would have a negative impact worldwide, Lagarde said in an interview with Irish radio station Newstalk. The extent of the damage will depend on the extent of the tariffs, how long they last, and whether negotiations are successful.

Tariff escalations often prove harmful even for those who cause them, Lagarde said. Therefore, they may lead to negotiations “where you actually sit down and discuss and eventually remove some of these barriers.”

Trump announced “Liberation Day”

US President Donald Trump plans to announce details of his announced far-reaching tariffs this evening. They could also severely impact the European Union and shake the global economy. Although many details about the new tariffs are still unclear, they could take effect immediately. “They will take effect immediately,” Trump spokeswoman Karoline Leavitt said.

The rules, which Trump plans to announce in a speech in the White House Rose Garden (10 p.m. German time), are likely to be the US president’s most aggressive and far-reaching tariff measure to date. The Republican has previously dubbed the day of the announcement “Liberation Day.” It has been unclear at this point whether the US government will explicitly target individual industries and countries with tariffs and respond with precisely tailored punitive measures, or whether it will instead impose blanket tariffs.

According to a report in the  Washington Post , several options are currently under consideration, but no final decision has yet been made. Over the weekend, Trump said that the tariffs would affect “all” countries, but the EU is a particular thorn in the 78-year-old’s side. He complains that European companies, overall, sell significantly more goods in the US than American companies do in the EU.

The Republican accuses the Europeans of distorting competition through subsidies and strict import regulations. He also repeatedly criticizes the value-added tax levied in Europe. However, this does not constitute a barrier to trade: It is levied regardless of whether goods were produced domestically or imported from abroad.

Ifo Institute warns of effects of blanket tariffs

According to the Munich-based ifo Institute, the introduction of “reciprocal tariffs” by the United States would have only a minor impact on German exports. According to a simulation, exports to the United States would decline by 2.4 percent without countermeasures from the European Union and by three percent with countermeasures.

In the past, Trump has repeatedly spoken of reciprocal tariffs. This means that a product from one country is subject to the same surcharges when delivered to the US as an identical US product is when delivered to that country. The difference between the average level of EU import tariffs and that of the US is currently small in report of ifo data.

According to the ifo Institute, however, the effect would be significantly stronger with flat-rate tariffs on all foreign goods. According to the simulation, with flat-rate US tariffs of 60 percent on Chinese products and 20 percent on all other foreign goods, German exports to the US would fall by 15 percent. “The planned tariff increase marks a turning point and is a frontal assault on the rules-based global economic order,” said ifo researcher Lisandra Flach.

EU announces countermeasures and warns of trade war

According to EU Commission President Ursula von der Leyen, the US will impose new special tariffs on imports of semiconductors, pharmaceuticals, and timber . A further announcement regarding reciprocal tariffs is also expected, said von der Leyen, in response to allegedly unfair tariffs imposed by other countries. These would immediately apply to almost all goods and many countries around the world and would be in addition to the special tariffs already imposed by Trump. The EU has already made clear that it will respond to new tariffs with countermeasures. This could trigger a trade war.

Trump has already imposed tariffs on all aluminum and steel imports, imposed 25 percent tariffs on imported cars and auto parts, imposed increased tariffs on all goods from China, and targeted his neighbors Canada and Mexico . While he partially suspended tariffs on goods from Canada and Mexico, this deadline is now expiring.

Tariffs could drive up consumer prices in the US

Trump has called tariffs his favorite word in the past and has already introduced various punitive taxes during his first term in office. He wants to use tariffs to correct the trade imbalance and strengthen the US as a manufacturing location. At the same time, tariff revenues could serve to at least partially finance his expensive campaign promise of comprehensive tax cuts. Tariffs also serve as leverage for the Republican to achieve his goals in negotiations with other countries.

An import tariff is a tax a government imposes on imported goods. It increases the price of imported products and is intended to protect domestic companies from foreign competition. In most cases, the importing company pays the tax—in the case of US tariffs, the company in the US. Economists fear that companies will pass the higher prices on to consumers . This could fuel inflation in the US and slow growth. 

Trump and his team brushed aside these concerns. The tariffs mean “more jobs in your communities, which means more money, more investment, and more money in your pocket,” Trump spokeswoman Leavitt told Americans. “It affects the world, not just this country,” Trump said earlier this week. They’re doing the right thing for the United States.

“We don’t know what awaits us”: Trump’s tariff plans plunge logistics industry into chaos

Even before the new US tariffs are announced, chaos reigns in supply chains. Experts are sounding the alarm – and packages are piling up at the ports.

Donald Trump ‘s planned import tariffs have triggered uncertainty and chaos in international goods transport. As the Reuters news agency reports, US container imports by ship have been rising to record levels for months. Companies are trying to bring their goods to the US before the new tariffs come into effect .

Air freight traffic has also increased: According to Lufthansa Cargo and DHL , pharmaceutical products and car parts are increasingly being shipped by plane. The result: freight rates are rising rapidly. For example, a 40-foot shipping container from the Far East to the US West Coast rose by 16 percent to $2,844 within one day.

Trump’s trade policy was already characterized by aggressive tariff strategies during his first term in office. Special tariffs were imposed on China in particular , but also on Canada , Mexico , and the European Union. According to Trump, the goal of these measures was to reduce trade deficits and secure American jobs. Critics, however, accuse him of promoting global protectionism and straining international trade relations through the tariffs.

The Trump administration’s short-notice and changing announcements are now putting pressure on the entire logistics industry, says Blake Harden, a representative of the American Retail Association (RILA). He explains: “The phased introduction of tariffs has led to growing confusion.” He says companies lack the time to adjust to the new conditions.

Port fees could hit the agricultural and energy sectors

The US President apparently plans to announce new tariff measures on Wednesday evening (German time). According to US media reports, the “tariff hammer” is expected to involve a blanket increase of around 20 percent on most imports. Individual countries could be spared through agreements. However, no final decision has yet been made, according to the US President’s Office. Insiders say the administration expects additional revenue in the trillions.

In addition, additional port fees for ships with connections to China are apparently being discussed. Experts warn that this regulation could hurt precisely those sectors Trump actually wants to support. Such as agriculture and energy exports. As happened during the coronavirus pandemic, some ports could become overcrowded and others deserted to avoid higher fees.

Peter Sand, chief analyst at freight consultancy Xeneta. He said: “You can’t make important supply chain decisions when the rules of the game are constantly changing.” The impact on the freight market is already evident: According to S&P Global Market Intelligence. US container imports are expected to decline by 0.7 percent in the second quarter. Analysts expect a decline once the new tariffs take effect.

Customs service providers at their limits

The state of emergency is also being felt by customs service providers. Kit Johnson of the U.S. Customs Agency John S. James explained that his employees are currently working 20 to 30 hours of overtime per week. “We don’t really know exactly what to expect until we see the executive order. And then it’s a crazy scramble to figure out what to do.”

Meanwhile, the US Customs and Border Protection agency is working feverishly to reprogram its systems. Just in February, the Trump administration postponed planned tariffs on cheap imports from platforms like Temu. And Shein because packages had piled up at New York’s JFK Airport. Customs broker Johnson said customs officials don’t have enough time to reprogram and test the software. “The more tariffs we have, the harder it will be for everyone to keep up.”

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Sources used:

• With material from the News agencies  dpa and AFP, ntv.de, Reuters news agency, BBC News and CNN reports. The content has been independently analyzed and rewritten to provide original insights.

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