“We recognize that uncertainty regarding global trade is impacting the economic outlook for many economies, and in this sense, the progress indications between America and China are welcome,” stated Paschal Donohoe.
Upon arriving at the meeting of finance ministers of the eurozone, the Eurogroup president welcomed this pause between Washington and Beijing. However, he admitted that for the European Union (EU), “the work will continue” to prevent the imposition of tariffs by the United States, given the “trade relationship worth billions of euros every day.”
“Despite everything, our economic performance [of the eurozone] remains very strong. At the moment, it is lagging behind other parts of the world, but we are at the forefront of many uncertainty forces and our economies continue to perform strongly,” Paschal Donohoe further emphasized.
These comments come ahead of the European Commission’s release of its spring economic forecasts next Friday.
The macroeconomic projections from the EU executive are expected to be influenced by the United States’ protectionist policies due to the imposition of high tariffs on the EU. This has triggered trade tensions, financial market instability, and fears of economic slowdown and persistent inflation.
Last Thursday, the European Commission proposed a list of US industrial and agricultural goods valued at 95 billion euros to tax if negotiations with Washington do not yield results, while also preparing a litigation case at the World Trade Organization.
This marks a moment of trade tensions following Donald Trump’s announcement of imposing 25% tariffs on steel, aluminum, and European cars, in addition to 20% reciprocal tariffs on the EU bloc, the latter of which have been suspended for 90 days.
The suspension calmed markets that had suffered significant losses and was endorsed by the EU, which also suspended 25% tariffs on American products in response to those the United States applied to European steel and aluminum for the same duration, until mid-July.
The European Commission, holding the competence of the EU’s trade policy, has opted for prudence, a caution supported by countries such as Portugal.
Brussels aims to negotiate with Washington during this 90-day pause, having already proposed zero tariffs on industrial goods in mutual trade.
Currently, 379 billion euros in EU exports to the United States, equivalent to 70% of the total, are subject to the new tariffs (including those temporarily suspended) since the new US administration took office.
Calculations by the European Commission indicate that the new US tariffs could result in losses of 0.8% to 1.4% of the US’s Gross Domestic Product (GDP) by 2027, while this percentage stands at 0.2% of GDP for the EU.
In the worst-case scenario, where tariffs become permanent or if there are other countermeasures, economic consequences would be more negative, ranging from 3.1% to 3.3% for the United States and from 0.5% to 0.6% for the EU.
Globally, the EU executive estimates a 1.2% loss in world GDP and a 7.7% decline in global trade within three years.
