USA vs EU tarriff war: a defeat for everyone

USA vs EU tariff war: a defeat for everyone

1 giugno 2018

Alessandra Lanza, Claudio Colacurcio

In the case of escalation 7.8 billion fewer exports for the States, 4.4 billion for the Old Continent


The temporary exemption granted to the European Union by the US Administration is no longer in place: the 25% tariff on steel and the 10% levy on aluminium come into force. 

The trade between Europe and the United States amounts to 700 billion Euros and is the main bilateral flow in the world trade: the likely escalation in the trade war, launched by Trump, is played in this frame. 

Using game theory, this is the worst possible result for both actors involved: 7.8 billion less exports for the States, 4.4 billion loss for the Old Continent in case it reacts and protects itself in turn. In the unlikely scenario of a non-response to tariffs from Brussels, the economic damage would instead amount to 2.1 billion for the EU.

I rapporti commerciali tra Stati Uniti e Unione Europea: possibili payoff (delta export e produzioni in miliardi di euro)
Source: Prometeia on Eurostat and National Statistical Institutes

In 2017, steel and aluminium imports to the US were worth 43 billion, more than twice as much as exports. But what could be the effect for Italy? For the time being, limited: for the 71 "product codes" involved in Trump's tariffs, the figure is 500 million Euros: 1.2% of Italian exports to the United States. Bearing in mind that our country also exports product niches that are difficult to replace, the loss would actually be reduced to 200 million

What is worrying, however, is not so much the effect of this first move, but what can trigger it. If Europe, as announced, responds with protectionism - on evocative products such as jeans, motorcycles, cosmetics - Washington is ready to go further, for example by taxing cars (27 billion EU exports to the US, including 3 billion from Italy), in a negative spiral for all countries involved. 

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