With two days to go before the imposition of new US tariffs on Wednesday 2 April, Monday 31 March saw the European Commission still hard at work negotiating with Washington on the one hand, and finding the best response on the other. It is dealing with Member States and MEPs who are calling for a firm response, but also a range of European economic sectors who fear tariffs from both sides and are calling for appeasement.
Against this backdrop, on Monday 31 March the German Heinrich Böll Foundation published an analysis of three scenarios in respect of the trade tensions between the EU and the United States. Firstly, it assesses the consequences of an escalation of the tariff war, which would lead to standard tariffs of 25% on both sides of the Atlantic. Slovakia, Austria and Lithuania would be the countries most adversely affected in terms of exports. In such a scenario, EU GDP would fall by 0.25%, with significant losses experienced in the pharmaceuticals (-9%), transport equipment (-7%) and vehicles (-4%) sectors.
In a second scenario, the Foundation is testing the hypothesis of an agreement between the EU and the United States that would grant mutual tariff elimination for industrial goods. The effect on GDP in the EU would be slightly positive. The authors of the analysis also emphasise that agreements between the United States and other third countries do not prevent Washington from imposing customs duties, as the situation with Canada and Mexico demonstrates.
This is why they recommend that serious consideration be given to the third scenario, which is for the EU to strengthen its trade ties with its existing partners. Working closely with countries such as Canada, Mexico and Japan to remove remaining trade barriers would enable the EU to increase its GDP by 0.28%, according to the Heinrich Böll Foundation. This approach would also contribute to the EU’s risk reduction strategy.
This was also recommended by the Spanish Minister for the Economy, Carlos Cuerpo, on a visit to Brussels on Monday. At a time of trade tensions with Washington, it is all the more important to ratify the trade agreement with Mercosur, he insisted, following a meeting with the European Commissioner for Trade and Economic Security, Maroš Šefčovič.
Fearing the negative effects of future American and European tariffs, the Minister stressed the need to maintain “constant communication with the U.S. administration and seek a negotiated solution that benefits both parties”. This was to avoid “protectionist measures that would be harmful to everyone”, he told a number of journalists, including Agence Europe.
However, the Minister supports the European Commission’s current approach, as it prepares to respond to the US measures.
When asked about the most appropriate tool for responding to the US tariffs, and in particular the possibility of making unprecedented use of the EU’s “anti-coercion” instrument, adopted at the end of 2023 (see EUROPE 13263/10), Mr Cuerpo felt that the EU had “the appropriate instruments” to respond “in a fair and proportionate manner”, with the anti-coercion instrument being one of them. “I wouldn’t rule out any instrument a priori”, he said.
See the analysis by the Heinrich Böll Foundation: https://aeur.eu/f/g6f (Original version in French by Léa Marchal and Mathieu Bion)