Good morning,
“A paradigm shift of the global trading system” was how EU trade commissioner Maroš Šefčovič described Donald Trump’s ‘liberation day’ tariffs ahead of an EU trade ministers meeting on Monday (7 April).
In truth, it’s too early to be making such calls.
That would be to assume that Trump has a policy objective at the end of the tariff war. As John Bolton, the veteran Republican who was national security advisor in the first Trump administration, wrote on Monday, that is not how the president’s mind works.
The EU commission is likely to offer zero tariffs on goods if the US does likewise and to slash its duties on American cars. But that won’t lead to a sharp increase in the number of Chrysler’s, Lincolns and Chevrolets on European roads. The problem with these vehicles for the European motorist is not the sticker price but their poor fuel efficiency.
The stock markets have taken a hefty hit just from the announcement of the tariffs. That includes many of Trump’s corporate allies who have seen billions wiped off their net worth.
For the moment, there is little sign that Trump’s advisors are ready to engage in serious discussions on trade with the EU, or anyone else for that matter.
So what happens next?
Should the tariffs stay in place for six months or more, and the EU, China and other major powers respond with their own counter-tariffs and trade defence measures, there will be a global recession and the US will be hit hardest. And Trump’s Republicans will pay the price at the Congressional mid-term elections in 2026.
There is a reason why tariffs are – with the exception of Trump – used as a last resort by governments. That is because they jack up prices and depress trade. The US president may live in his own world, but he is not going to successfully re-write the laws of economics.
The Trump tariffs are an expensive and painful nuisance. But they are not here to stay.
- Benjamin Fox, Africa editor
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