A second Trump presidency could destabilize the global economic order, sparking a trade and investment war 'on steroids’ – Euractive

Donald Trump’s second term in the White House could seriously disrupt the global economic order and trigger an economically devastating trade war between the United States and the European Union, analysts warn.

Trump, who is in a tight election race with Democratic nominee and incumbent Vice President Kamala Harris, has promised to impose at least a 60% tariff on Chinese goods and a 10% tariff on imports from the rest of the world if re-elected. President of the United States.

While he has introduced tariffs on a variety of goods, including washing machines, solar panels, aluminum and steel – such plans have raised fears that Trump may be more protectionist than in his first term.

„Trump stands for radical 'America First’ policies and shows little interest in having an open Atlantic economic system,” George Riegels, associate director of the European Policy Center, told Uractive.

„Under Trump, we’re likely to see a trade and investment war on steroids.”

Riegels added that Trump’s re-election would „cause and distribute a huge loss in economic performance.”

„The green transition will become more expensive, inflationary pressures could rise dramatically again, and unemployment will rise as countries move toward protectionism,” he said.

Alicia Garcia-Herrero, a senior fellow at the EU policy think tank Bruegel, said Trump’s choice of Ohio Senator JD Vance as his running mate indicates his protectionist stance is as strong, or perhaps even stronger, than it was when he was president. From 2017-2021.

A staunch critic of free trade, Vance It was emphasized again and again „The need to protect U.S. industries” from global competition with „broad-based tariffs, particularly on goods from China.”

„If we had any doubt that Trump was going to be a different Trump, a Trump that was more attractive to Europe, for whatever reason, I think we know now,” García-Herrero told Uractive.

García-Herrero noted that EU leaders will try to offset Trump and Vance’s isolation by engaging in „frenetic action” to build deeper economic and research partnerships with other „like-minded partners” including the UK, Canada, Australia, South Korea and Japan. .

Meanwhile, Trump’s re-election in November will make China „an even tougher competitor for other markets and for influence and power in the world,” Riegels noted.

„It will be a fight for all the BRICS countries: Brazil, India, South Africa and so on. And it will be a fight for the resource-rich countries and the Global South,” he said.

„I think the world can divide much faster than we expect,” he added.

US-EU trade war risk 'asymmetric’

Analysts point to at least two key ways that Trump’s proposed tariffs could directly affect the European economy.

First, a 60% tariff on Chinese imports could lead to more goods being diverted to the US market and „piled up” in Europe, thereby forcing Europe to take its own protectionist measures.

„I think industry after industry in Europe will run to national capitals and to Brussels: 'You have to save us — with subsidies and trade protection,'” Riegels said.

From that point of view, the European Commission Latest result The introduction of tariffs on Chinese-made electric vehicles is only a precursor to things to come, he said.

Sander Tordoir, chief economist at the Center for European Reform (CER), noted that Trump’s 10% tariff on global goods would particularly hit Germany, the bloc’s largest economy, which is already reeling from a combination of weak demand from China and growing competition.

„10% is not a huge tax, but it will certainly affect German exports in an era where they are already struggling,” he said.

Tortoir explained it The US has recently overtaken China As Germany’s top trading partner and with the EU as a whole currently running a trade surplus of more than €150 billion with the US, the risks of a US-EU trade war are „asymmetric”.

He also noted that US protectionism would only increase Germany’s difficulties in finding suitable export markets, given China’s increasing tendency to block foreign companies’ access to its own economy.

„If I were to conduct economic policy in Berlin I would be very concerned about that, because if the world’s two largest economies no longer provide such market access, it is not really clear where you can sell German capital goods,” he added.

Plays on America’s defense leadership

Some analysts have also suggested that Trump may try to weaponize the United States’ status as Europe’s security guarantor to influence the continent’s trade policy.

Tobias Gerg, senior policy fellow at the Council of European Foreign Affairs, told Euractiv that Trump prefers to use 'sticks’ rather than 'carrots’ to encourage European companies to reduce their dependence on China.

„Right now the U.S. is giving companies a lot of incentives to behave in a certain way, especially in the deflationary law, which basically says: 'You’re cutting China, but you’re getting money in return,'” he said. American effort to provide Over a trillion dollars In tax incentives and subsidies to encourage domestic green production.

„It’s a very expensive agenda. I think you can very well imagine that a Republican administration could turn it around and say, 'If you don’t behave a certain way and change your supply chain, you’re going to have access restrictions to the American market.’

Trump’s policies could increase Chinese efforts to „drive a wedge” between EU-US relations, Gehrke said, by encouraging Europe to seek greater economic cooperation with Beijing than Washington.

However, he noted that the EU’s security reliance on the US would be too strong for Beijing to successfully pull Europe out of Washington’s orbit.

„It’s clear to everyone that America’s dependence on security guarantees and support for Ukraine. And I think the risk of jeopardizing that is going to tie Europe economically to the United States,” he said.

Inevitable world disconnection?

Many analysts say the growing rivalry between the US and China means Europe’s economic and trade policies will have to undergo major changes, regardless of who wins the presidential election in November.

„We have to find other ways to do things without America or with less America,” Bruegel’s Garcia-Herrero said.

„This is true even if Harris wins the election, because this is about China — and the rest of the world is going to pay the price for America’s action. [away] From Open Access.”

EPC’s Riegels noted that the „overall direction of the world” would be the same under a Trump or Harris presidency — that is, toward greater geopolitical and economic fragmentation.

“Today we are in a different era. It’s no longer about markets and prices: it’s about security and the strategic rivalry between the US and China. And it’s going to drive the disconnection of the world much faster than we think.

[Edited by Anna Brunetti/Rajnish Singh]

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