Insight
Trump’s tariffs – how should the EU react? by Aslak Berg, 26 February 2025 The ‘Fair and Reciprocal Tariff Plan’ proposed by Donald Trump sounds innocuous but is a roadmap towards an all-out global trade war. To avert one, Europe must act firmly and speedily. On February 13th, the Trump administration presented the Fair and Reciprocal Tariff Plan (FRTP), signalling that it is ready to end the global trading system as we know it. Financial markets greeted the proposal with a shrug, lost in the flurry of Trump’s executive orders. But in terms of consequences for the global economy, it is the most significant and devastating of Trump’s proposals. What is being proposed? Because of its name, many have interpreted the FRTP as a mirroring exercise in which the US would match its import tariffs with those faced by US exports in the partner country. The combination of countless products across a wide swathe of trade partners would lead to a huge number of different rates. In fact, such an exercise would be unworkable, as the US would have to manage over 2.6 million different tariff rates, depending on the product and the country. Even if the administrative complexity could be overcome, such a proposal would only raise tariff rates by a very modest amount. Trump’s plan would hit developing countries such as Vietnam and India hardest, since they tend to have higher tariffs. The consequences for Europe would be limited, as, as the average EU tariff rate on US imports is only half a per cent higher than US tariffs on EU imports. The EU could slightly lower its tariffs to iron out the wrinkle. The problem is that Trump’s actual proposal is both simpler and more radical. According to White House officials, “the expected result is an individual additional tariff rate for each country or trading partner, rather than attempting to set corresponding tariff rates on every product.”
CER INSIGHT: TRUMP’S TARIFFS – HOW SHOULD THE EU REACT? 26 February 2025
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