By John Q. Hosedrinker 
The European Union warns that a 30% tariff on goods imported from the bloc by the United States would effectively halt trade. EU Trade Commissioner Maroš Šefčovič expressed concern over the potential for “super-negative” effects on both sides of the Atlantic and emphasized the EU’s desire for a negotiated agreement with Washington. The EU is delaying countermeasures on US exports to allow for more negotiation, but is preparing to retaliate. European stocks fell on Monday following the new tariff threat.
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Trump’s 30% tariffs on Europe would effectively knock out transatlantic trade, as the EU trade chief suggests, throwing a wrench in a massive economic engine that currently churns out around $2 trillion annually. The potential impact is staggering, essentially severing a critical artery of global commerce. Considering that the US economy is significantly larger than those of Canada and Mexico combined, making it almost eight times the size, the prospect of such drastic tariffs demands serious consideration. To simply “ignore” the US economy isn’t a realistic or straightforward solution, despite the frustration it evokes.
Such tariffs, reminiscent of the Smoot-Hawley tariffs that helped ignite the Great Depression, carry the risk of a similar economic downturn. The potential for a 30% tariff hike would inflict considerable damage, impacting exports and possibly shrinking the American economy by as much as 30-40%. This would also affect the world trade system. Such a move could be considered an economic disaster for all involved. The repercussions would extend beyond the economic realm, impacting international relations and cooperation.
The question then becomes: will it happen? The answer is tied to an individual’s tendencies. The motivations behind such a decision are complex. Does the need to exert dominance on the world stage outweigh the desire to capitalize on financial gains from the market? It is a difficult calculation to make, hinging on the relative importance of ego versus profits. Some suggest that the primary motivation may be to distract from other issues, while others believe it’s a calculated tactic to extract concessions.
One potential consequence of such a move is increased European interest in trading with partners outside the US. The focus could shift towards nations like China, India, South America, and, importantly, Canada and Mexico. While there would be hiccups, like sourcing corn starch, the shift in trade dynamics could be significant. However, the United States would remain a powerful economic force.
If tariffs were imposed, retaliatory measures from the EU would likely follow, creating a cycle of escalating economic friction. One idea proposed by some is the automatic imposition of matching tariffs, effectively punishing the US for its own actions. Another suggestion is a digital services tax. Such a tax would target American companies profiting from European markets, and could be a way to generate revenue and shift the financial burden.
Ultimately, the imposition of such tariffs might well be a self-inflicted wound for the US. It could lead to economic isolation, negatively impacting American consumers through increased costs and reduced access to goods. The US may have its own motives for imposing such tariffs, however. Regardless of the reasons, there is a consensus that a 30% tariff is a death knell for trade.