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FRANKFURT – President Trump's trade war was supposed to make the Europeans feel such pain that they would like to have pity on us at the negotiating table. But that does not work very well, according to a new study by the European Central Bank.
Nearly a year after the White House imposed tariffs on European steel and aluminum, the damage done to European exports was surprisingly mild, according to the published study. Wednesday.
Some industries, including heavy equipment manufacturers, may even have benefited. Indeed, the White House has imposed a wider range of tariffs on Chinese products, making competing European products cheaper by comparison and allowing them to gain market share.
Tariffs "represent only a modest and unfavorable risk to the global and eurozone outlook," says the study by Vanessa Gunnella and Lucia Quaglietti, economists at the European Central Bank.
The study of the central bank, which stands as Europe and the United States to prepare for high-level trade negotiations, reinforces further research showing that tariffs on European goods do not represent much in themselves. They have probably harmed the American economy more than the intended goals.
One reason is that much of the steel sold by Europeans in the United States is specially formulated for specific uses, such as airplane parts or oil rig equipment. US companies do not find domestic suppliers that can provide the same products, which often contain patented combinations of minerals or other metals. They therefore simply end up paying 10% tariffs on aluminum and 25% on steel and passing on the extra costs to US consumers.
"The US does not necessarily have a large production capacity to catch up," said Oliver Rakau, chief German economist at Oxford Economics, who did not participate in the central bank study.
At the same time, the trade war has a significant psychological impact. Mr Trump has shaken Europe's confidence with tariffs and its threat of extending taxes to cars. Fearful of what might happen next, businessmen are delaying plans to expand factories or hire new workers.
"The uncertainty of protectionism is weighing on the economic climate," the central bank study said, adding that this was just one of the reasons for Europe's sluggish growth.
Many economists have said that the introduction of tariffs on cars would greatly increase the stakes and cause much more damage.
As part of their study, which appears in the In their monthly bulletin of the European Central Bank, Ms Gunnella and Ms Quaglietti also calculated what would happen if the United States imposed tariffs of 10% on imports from all countries and all countries affected by imports. duties reacted in kind.
The US economy would suffer the most damage in such a trade war because US products would become more expensive abroad, said economists at the central bank. China would be ahead.
In Europe, damage to business confidence in the event of a trade war would be largely offset by an increase in exports to countries other than the United States. European companies could take over market share from their US rivals in China.
It already seems that European manufacturers of factory machinery, construction vehicles and other heavy equipment are exploiting Trump's trade war with China. Industrial machinery is Germany's second largest export category after cars, as well as a major sector in countries such as the Netherlands and Italy.
In recent years, Chinese companies have become more proficient at producing sophisticated machines and challenging the dominance of European competitors. But White House tariffs on Chinese products have given European companies at least a temporary advantage in terms of price.
Yet few business owners feel good about the turmoil. "Other commercial disputes would not be in our interest," said Trumpf, a German company renowned for its machines using lasers to cut steel, in a statement.
The United States and China are Trumpf's two largest foreign markets, with factories in both countries.
"Things are going well for Trumpf, but also for China, the United States and Europe," the company said.
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