Summary of The EU Response to US Trade Tariffs

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The United States’ opening volleys in what has the makings of a global trade war forced the European Union to reciprocate to defend itself and to preserve the post-World War II global order, according to scholars Maria Demertzis and Gustav Fredriksson in this bracing report. They argue that, in the final analysis, “trade is not a zero-sum game,” but they advise that the EU should thoughtfully enact its own countermeasures and cultivate its trade partnerships with other nations. Executives and trade experts will benefit from this brief yet probing analysis of the economic consequences of a trade war. 

About the Authors

Maria Demertzis is an economist and Gustav Fredriksson is a research assistant at Bruegel.

 

Summary

Trade wars are a losing proposition for all parties involved. The back-and-forth of tariff imposition reduces demand, output and the availability of products. Spooked by an increasingly volatile business climate, investors postpone projects and lenders require a higher cost of capital to compensate for increased risk. In 2018, American tariffs provoked retaliatory actions from the European Union, signaling the beginning of what could be a grand-scale trade war. At risk are the global economy and multilateral system of trade.  

Tariffs have far-reaching consequences...


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