FRANKFURT – President Trump’s trade war was supposed to make Europeans feel so much pain they would for mercy at the negotiating table. But it is not working very well, according to a new study by the European Central Bank
Almost a year after the White House imposed tariffs on European steel and aluminum, the actual damage to European exports has been surprisingly mild, according to the study released on Wednesday
Some industries, notably manufacturers of heavy equipment, may have even profited. This is because the White House has a broader array of tariffs on Chinese products, making competing European goods less expensive by comparison and allowing them to gain market share.
The central bank’s study, which comes as Europe and the United States prepare to start high-level trade talks, Increasingly other research shows that the tariffs on European goods have, by themselves, not amounted to very much. They have probably hurt the United States economy more than the intended targets
One reason is that much of the steel that Europeans sell to the United States is specially formulated for specific uses, like aircraft parts or oil drilling equipment. American companies cannot find domestic suppliers able to supply the same products, which often contain patented combinations of minerals or other metals. So they simply wind up paying the tariffs of 10 percent on aluminum and 25 percent on steel and passing on the extra cost to American consumers.
to pick up the slack, ”said Oliver Rakau, chief German economist at Oxford Economics, who was not involved in the central bank study.
At the same time, the trade war is having a significant psychological impact. Mr. Trump has rattled European confidence with the tariffs and his threats to expand the levies to include cars. Fearful of what may come next, business people are delaying plans to expand their factories or their new workers.
“Uncertainty related to protectionism is weighing on economic sentiment,” the central bank study said, adding that was only one of the reasons for Europe’s tepid growth.
Many economists have said that putting tariffs on cars would raise the stakes significantly and cause a lot more damage.
As part of their study, which appears in the European Central Bank’s monthly bulletin , Ms. Gunnella and Ms. Quaglietti also calculated what would happen if the United States applied 10 percent tariffs on imports from all countries, and if all of the countries hit the tariffs retaliated in a child.
The United States economy would suffer the most damage in such a trade was because American products would be more expensive abroad, the central bank economists estimated. China would come out ahead.
In Europe, the damage to business confidence in the hypothetical trade was largely canceled out by increased exports to countries other than the United States. European companies would be able to share their American rivals in China.
Trump’s trade war with China. Industrial machinery is Germany’s second largest category of exports after cars, and also an important sector in countries like the Netherlands and Italy.
In recent years, Chinese companies have become more skilled at producing sophisticated machinery and challenging the dominance of European rivals. But White House tariffs on Chinese products have given the European companies at least a temporary price advantage.
Still, few business managers are feeling good about the turmoil. “Trumpf, a German company known for machines that use lasers to cut steel, said in an emailed statement.
The United States and China are Trumpf’s two biggest foreign markets, and it is has factories in both countries, the company noted
“Things go well for Trumpf when things go well for China, the USA and Europe, ”the company said.