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Tariff Wars: EU goes on war footing in response to Trumps declaration "that trade wars are good and easy to win" - by RM

"The reincarnation of US Voodoo Economics"
First a look at the "big picture"  of trade between the EU and the US, which Mr. Trump is now ready to undermine with his recent nonsensical "tariffs" statement.
  • Total US investment in the EU is three times higher than in all of Asia.
  • EU investment in the US is around eight times the amount of EU investment in India and China together.
  • EU and US investments are the real driver of the transatlantic relationship, contributing to growth and jobs on both sides of the Atlantic. It is estimated that a third of the trade across the Atlantic actually consists of intra-company transfers.
  • The transatlantic relationship also defines the shape of the global economy as a whole. Either the EU or the US is the largest trade and investment partner for almost all other countries in the global economy.
  • The EU and the US economies account together for about half the entire world GDP and for nearly a third of world trade flows.
 The EU response to the Trump Tarrifs announcement was swift and surgical .

The European Union’s top trade official mentioned cranberries, orange juice and peanut butter as possible targets Wednesday as the E.U. prepares to strike back if President Trump follows through with tariffs on imports of steel and aluminum.

European officials are also preparing to target $3.5 billion in American goods through a 25 percent "tit-for-tat" levy across consumer, agricultural and steel imports, Bloomberg reported, citing a list compiled by the European Commission.

This came after EC President Jean-Claude Junker on Friday mentioned targeted products like Harley-Davidson (HOG) motorcycles, Levi's jeans and bourbon if the U.S. tariffs are implemented. Canada President Justin Trudeau called Mr. Trump Monday evening to register his "serious concer".

"Retaliation against US  by trading partners is likely," Goldman Sachs (GS) economists wrote in a note. "In the past, retaliatory tariffs have focused on the product in dispute (in this case steel and/or aluminum), consumer goods with a particular focus on luxury items and agriculture. We expect a similar pattern this time."

While retaliation is likely to come in  tariff form, "more subtle changes to tax and regulatory policies targeting U.S. companies could also follow," the economists wrote.

Ford (F) and GM (GM) could feel a pinch of about $1 billion each, or 12 percent and 7 percent of each company's respective operating income for 2017, if the 25 percent steel tariff is implemented and prices rise at a similar rate, Goldman Sachs analysts estimated in a recentseparate report.

U.S.-based machinery companies would get squeezed as costs increase. Well-known brands with good distribution, like Deere (DE) and Caterpillar (CAT) might do better than Terex (TEX) and Oshkosh (OSK), Goldman said. Oshkosh is based in House Speaker Paul Ryan's home state of Wisconsin. 

 E.U. Trade Commissioner Cecilia Malmstrom also took aim at Trump’s assertion that U.S. national security justified plans to impose tariffs of 25 percent on steel and 10 percent on aluminum.

The U.S. measures “would mainly impact traditional allies of the United States,” she said.

E.U. officials had previously flagged Kentucky bourbon, Harley-Davidson motorcycles and Levi’s jeans among the products they have in their sights for retaliatory tariffs. A draft of European countermeasures published by Bloomberg News targets $3.5 billion in annual imports from the United States, including $1.1 billion in U.S. steel products, along with clothing, makeup, motorcycles, boats, corn, rice, beans and other agricultural products.

E.U. countries exported $6.2 billion worth of steel to the United States in 2016, according to E.U. figures. The E.U. is the top trading partner of the United States in goods, and it is the top U.S. export market.The European Union’s top trade official mentioned cranberries, orange juice and peanut butter as possible targets Wednesday as the E.U. prepares to strike back if President Trump follows through with tariffs on imports of steel and aluminum.

Note EU-Digest  2017 :  See list below of U.S. trade in goods with European Union
Please note that: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding. Table reflects only those months for which there was trade.

Month Exports Imports Balance
January 2017 21,290.3 32,828.8 -11,538.5
February 2017 22,994.8 32,386.5 -9,391.7
March 2017 25,691.5 36,881.1 -11,189.6
April 2017 22,960.2 35,498.7 -12,538.5
May 2017 23,732.0 36,488.1 -12,756.1
June 2017 23,768.1 36,237.8 -12,469.7
July 2017 21,438.3 34,892.7 -13,454.5
August 2017 23,383.6 35,772.4 -12,388.8
September 2017 24,277.9 35,702.6 -11,424.7
October 2017 25,689.3 39,411.6 -13,722.3
November 2017 23,528.5 38,256.8 -14,728.3
December 2017 24,762.9 40,575.7 -15,812.8
TOTAL 2017 283,517.4 434,933.1 -151,415.6

Given the low average tariffs (under 3%), the key to unlocking this potential lies in the tackling of non-tariff barriers. These consist mainly of customs procedures and behind the border regulatory restrictions
The non-tariff barriers come from diverging regulatory systems (standards definitions notably), but also other non-tariff measures, such as those related to certain aspects of security or consumer protection.

The tariffs statement  by President Trump, if he persists to follow through on his threat, could  eventually also turn into a total trade war between the EU and US, and mean the end of the Atlantic Alliance, which has brought stability, peace and prosperity to Europe and the US,  since the end of the second world war. 

It must not be allowed to happen.   

EU-Digest  The above article can be republished only if EU-Digest is referred to as its source

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