EU-US trade tensions look set to escalate

Significance

Trump has threatened to impose tariffs of 10-20% on imports, which would leave EU exports, especially automobiles and pharmaceuticals, particularly exposed. There are other unresolved issues that both sides will need to address, including suspended tariffs related to the Airbus-Boeing dispute.

Impacts

• Germany’s vulnerability to US trade tariffs will further weaken its economic growth prospects for next year, and beyond.
• Trump will push the EU to take a tougher stance on China, though member-state divisions over China will likely persist.
• Growing tensions in global trade could incentivise the EU and United Kingdom to pursue closer trade relations.