World War Fee The EU voted Wednesday to introduce 25 percent import tariffs on American goods, with the first duties being collected from European consumers on April 15 – but bear in mind this action is a response to US President Donald Trump's earlier steel tariffs, and not the April 2 "tariff liberation day" duty hike.
Demonstrating how fast moving this political situation continues to be, in the past few minutes also today President Trump paused the broad US import tariff increases he promised to bring in this week. Those retaliatory rises will be held off for at least some countries for 90 days, and he vowed to lower the increase to 10 percent for those nations.
But China is the exception, and faces a tariff increase to 125 percent, over a "lack of respect" shown by Beijing. The Chinese had hours earlier whacked an 84 percent retaliatory tariff on US goods entering China in response to previous import tax increases promised by the US on goods from the Middle Kingdom. China has also restricted the export of vital rare earth minerals.
Earlier today, the European Commission said in a statement: "The EU considers US tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy," adding: "These countermeasures can be suspended at any time, should the US agree to a fair and balanced negotiated outcome."
As far as the American buyer is concerned, a trade war with Beijing is an act of self-harm as the US imports some $525 billion in manufactured goods from China, and the average buyer is going to pay the price on a massive range of products that America does not and cannot manufacture anywhere nearly as cheaply and quickly at home.
It has been only a week since Trump's administration decided to levy duties based on a back-of-the-envelope sum dividing the target country's trade deficit with the US by the country's exports to America. In the EU's case, this was 39 percent, which the president then cut in half to 20 percent "to be kind." He said at the time: "You know, you think of the European Union, very friendly. They rip us off. It's so sad to see. It's so pathetic."
Economists have pointed out that the White House's trade deficit math is a weird way to approach the issue, given that shortfalls in the value of goods traded between countries are created for many reasons that have nothing to do with fairness or trickery. As Olivier Blanchard, a senior fellow at the Peterson Institute for International Economics noted: "Running bilateral trade surpluses/deficits with different countries is the way it should be. Trying to eliminate each one is simply stupid. I have a trade deficit with my grocer, a trade surplus with my employer. I am not sure it would be a great idea for me to work for my grocer. Even if the loss for the economics profession was minimal, I am not very good at packing groceries."
Therein lies the rub for the US. Just yesterday an American keyboard maker explained it had neither the volume nor capital to open its own stateside factory. One of the advantages of living in the US is the purchasing power to outsource manufacturing and labor abroad, and like many others, among them tech giant Apple, it relies on contract manufacturing. Keyboardio wrote in an open letter: "Most of our electrical components are made in China. Sometimes we'll use or consider components not made in China – and they're made in Japan, Taiwan, or Germany. The USA doesn't make the components we need."
As for the EU, it is considering countermeasures other than a mere like-for-like tariff hike that would set off a similar ratchet action to the one being experienced by China and the US. The tech services countermeasures The Reg wrote about earlier this week are a planned part of its response to the April 2 "liberation" tariffs - and lay bare the problem of deficit math that Trump has been playing.
The member state bloc is a net exporter of goods to the US – and some of the gripes about not taking in many of the same type of American goods are well-founded. American automobiles are wider and heavier than many Europe's twisty cobbled streets can handle, and chlorine-washed chicken has been banned in the both the EU and the UK since the late nineties.
But it is most certainly a net importer of US services – including those of AWS, Microsoft and the like – something it's hoping to use as leverage in a trade dispute. But that's assuming that the tech giants have a lot more sway with the administration than even eminence grease Elon Musk has...
We'll find out next week. Or day. Or hour. ®
Source: The register