Trump’s Airbus Grandstanding Hits European Economy at a Bad Time
Trump's Airbus Grandstanding Hits European Economy at a Bad Time
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Donald Trump’s threat to slap tariffs on some $11 billion of European Union imports adds another layer of uncertainty on an economy already feeling the pain of the global slowdown.
The implementation of any new levies may be months away -- and estimated to have only a limited direct impact on trade -- but the news could damp sentiment, with repercussions for investment and demand. A measure of euro-area economic confidence is already at the lowest since 2016, having fallen almost non-stop for more than a year.
The list of imports includes passenger helicopters, various cheeses and wines, ski-suits and certain motorcycles. The U.S. says the move is in response to subsidies given to Boeing Co. rival Airbus SE. The Stoxx Europe Industrials index fell 0.3 percent on Tuesday, with Airbus itself dropping 1.8 percent.
In Germany, the euro area’s biggest economy and top exporter, manufacturing is shrinking the most in more than six years, Italy has sunk into recession and countries are also bracing for fallout from Brexit. The European Central Bank has long warned of the risks from rising protectionism, and the tariff threat is one more issue for policy makers to consider when they meet in Frankfurt tomorrow.
“The escalation spiral in the U.S.-European trade dispute has gotten turned up a notch,” said Andreas Scheuerle, an economist at DekaBank. If companies’ expectations for sales decline, “then their willingness to invest or hire declines. That’s the big danger in this story.”
The threatened tariffs come just as EU members are in the final stages of negotiating the terms of a mandate for the European Commission, the EU’s executive arm, to begin talks on industrial tariffs with the Trump administration.
Some EU members, led by France, are already skeptical of the value of negotiations with the U.S., which were agreed to last July in a bid to avoid auto tariffs the U.S. has threatened. That could mean that Trump’s latest step is merely a tactical move to encourage the EU into talks.
“This is just a sign that President Trump is trying to put pressure on Europe,” said Aline Schuiling, an economist at ABN Amro. “He’s still deciding on whether he will implement the tariffs.”
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Richard Bravo
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