“The trade war would be coming even if Trump had lost the election [de Estados Unidos]”says the Nobel Prize winner in Economics, Paul Krugman, in a forum recently published in the press. “When you start considering a trade war, you can immediately see an escalation, which in my opinion is negative. It benefits no one, not the United States or Europe, or anyone really. It would induce a global reduction in GDP,” laments, for her part, Christine Lagarde, president of the European Central Bank (ECB). in an interview with the Financial Times this Thursday.
The intentions of the new president of the United States are on the table. An increase in tariffs on China of 60% (and 200% in the case of electric vehicles), and between 10% and 20% for the rest of the world, including the European Union (EU). “It is one thing if tariffs are increased on certain products, as the US Administration has already done with electric vehicles. Another is whether they apply broadly to everything that crosses the border,” Lagarde continues. “With regard to tariffs on European imports (between 10% and 20%), there is a 100% difference between the two,” says the president of the ECB.
“The most likely thing, therefore, is an open trade war with China of greater proportions than the one that took place during Trump’s first term, where tariffs rose on average from 4% to 25% and China responded with equivalent measures,” observes Federico Steinbergprincipal researcher at the Elcano Royal Institute. “As soon as the tariffs on Chinese imports are established, probably in March or April, Trump will begin his trade dispute with the EU,” he adds.
According to Krugman, in reality, a trade war is looming that “in some ways has already begun.” In his opinion, “mainly because China refuses to act as a responsible economic superpower […] For this reason, the Biden Government has quietly followed a fairly hard line with the Asian ‘giant’, maintaining Trump’s tariffs and trying to limit its advances in advanced technologies. And it’s the reason why the European Union has imposed high tariffs on electric vehicles made in China. What will Trump add to the story? Ignorance, lack of focus and possible cronyism. Oh, and credulity,” considers the economist.
In this scenario, Spain will be the European economy least directly damaged by the trade war, according to the forecasts of most experts. Among the large EU countries, our foreign sector is the one that depends the least on the United States and China, the main contenders in a tariff conflict whose consequences in the short term will be a new rise in inflation around the world and problems for sectors concrete. In the long term, the blow could be “lethal,” as Steinberg describes it, referring especially to Germany.
Specifically, the weight of the United States in our country’s exports is 4.8% of GDP (Gross Domestic Product). Meanwhile, China remains at 4.7%. Between them, they do not reach 10%, as can be seen in the first graph of this information, which uses data collected by the latest economic forecast report from Oxford Economics, presented this week by its chief economist for Europe, Ángel Talavera.
The ICEX“a national public business entity whose mission is to promote the internationalization of Spanish companies and the promotion of foreign investment,” indicates that around 28,000 companies in our country sold a product or service to the United States in 2023. In 2022 , there were 33,000. The main world power was the sixth client for Spanish exports, after France, Germany, Italy, Portugal and the United Kingdom.
In the case of imports, the weight of the Asian ‘giant’ is more important for Spain, at 10.5% of GDP. We only depend on the United States by 3.6%, according to the same figures.
With this starting point, Oxford Economics makes a calculation on the impact on the economic activity of the main European countries that a reciprocal increase of 20% in tariffs between the United States and the EU would have in 2029. The damage to Spain’s GDP is minor, according to this projection. Exactly, 0.5%, about 10,000 million euros. For Germany or Italy it exceeds 1%.
The truth is that the foreign sector has become the great engine of our economy, with a crucial role of exports of services and with a structural transformation: this strength goes beyond tourism, and is concentrated in consulting sales, engineering, architecture or related to technology or telecommunications. An international environment of uncertainty is never good news, although Spain maintains its competitive advantages, as explained in this analysis.
Another case is the impact for specific sectors, as occurred in Trump’s first stage in the White House. Then the olive companies lost up to three quarters of their market, according to their own representatives. In 2017, the Republican president decided to raise tariffs on Spanish black table olives to 35%, to definitively leave them at 31%, where they persist until now.
A “lethal” blow for Germany
“The EU, and especially its main exporters such as Germany, are going through a weak economic situation, so tariffs of 10% or 20% on exports to the United States could be lethal,” laments Steinberg.
“For Trump, the European Union is a trade rival and not a geopolitical ally, which will surely lead to the elimination of the ‘Trade and Technology Council’, which has served as a forum for transatlantic economic dialogue for the last four years, as well as much more tense relations with both Brussels and Berlin. In this context, it would be important for the European Commission to adopt a transactional tone with Trump, putting on the table as soon as possible a trade offer that prevents Washington from imposing tariffs,” considers the researcher at the Elcano Royal Institute.
“In any case, the EU must also be prepared to re-evaluate its economic relationship with China and other countries of the plural south if it cannot effectively avoid an open trade conflict with the United States, especially if the situation in Ukraine evolves unfavorably.” for Europe. And, finally, if the trade war between the United States and China intensifies, some European countries and products could benefit due to trade diversion and creation,” he concludes.
#Spain #economy #damaged #trade #war #looms
