Meeting in Warsaw for their informal half-yearly meeting, European finance ministers welcomed, on Friday 11 April, the 90-day pause decreed by US President Donald Trump, which is intended to allow the European Union and other countries to negotiate alternative solutions to the so-called “reciprocal” tariffs with Washington (see EUROPE 13619/17). They nevertheless advocated caution and unity with a view to reaching a mutually satisfactory solution.
Hosting the meeting, the Polish minister, Andrzej Domański, described the 90-day period as a “step in the right direction” to be used “wisely” to reach a fair agreement for EU businesses and citizens. The European Commissioner for Trade, Maroš Šefčovič, will be in Washington on Monday 14 April for this purpose (see other news).
Several ministers, such as Spain’s Carlos Cuerpo, pointed out that the situation as it stood on Wednesday still corresponds to the across-the-board imposition of tariffs of 10% on EU exports to the United States, plus specific duties on steel and aluminium (15%) and motor vehicles (25%). According to Mr Cuerpo, it is necessary to at least return to the previous situation, or even do better, particularly on the basis of the proposal for zero customs duties put forward by the European Commission (see EUROPE 13616/1).
US digital services in the cross-hairs
Should US digital services be targeted if negotiations fail? On this point, the European Commissioner for Economy, Valdis Dombrovskis, said that “all options remain on the table”.
“We need to look at what is happening on the services side, including digital services”, he said, echoing statements made by the President of the European Commission, Ursula von der Leyen, in an interview with the Financial Times published on Friday.
The German minister, Jörg Kukies, on the other hand, was much more cautious. Advocating a “differentiated, nuanced” response, he welcomed the fact that the Commission was calibrating its response according to the sectors where there were “viable alternatives”. “In many areas of digital services for the corporate sector, if you look at data centres, cloud, AI, there are unfortunately no alternatives. It is no surprise if we have a very large trade deficit in services”, he noted. In his view, the first thing to do is to help Europe develop alternative services to those offered by the United States.
The Eurogroup anticipates the economic consequences of the tariffs
At the Eurogroup meeting on Friday morning, and with the central bankers at lunch, the ministers attempted to assess the impact of trade tensions on the European economy, despite the great uncertainty generated by the US choosing to go its own way.
Mr Dombrovskis pointed to modelling, regularly updated by the EU institution, which enables the assessment of the following impact of US customs duties: US GDP would fall by between 0.8% and 1.4% between now and 2027, and that of the EU by around 0.2%.
In the event of permanent US customs duties or retaliation by the target countries, the economic consequences would be worse over the same period: a fall in GDP of between 3.1% and 3.3% for the United States, between 0.5% and 0.6% for the EU and 1.2% for global GDP. Global trade is forecast to fall by 7.7% in three years.
Summing up the discussions of the enlarged Eurogroup, its President, Paschal Donohoe, indicated that the euro area intended to adopt “a unified stance” and to draw up “appropriate” economic and budgetary policies in response to the US administration’s decisions. He noted “a even higher level of urgency” to make progress on projects of common interest, such as the creation of a digital euro and the integration of European capital markets.
ECB President, Christine Lagarde, noted that, despite the high “volatility” observed in the financial markets, the European markets were continuing to operate in an “orderly fashion”. She assured that the Frankfurt monetary institute was closely monitoring developments in the exchange markets and their impact on inflation, although the ECB has not set itself a target for the euro exchange rate. (Original version in French by Mathieu Bion)