Trade War also comes to Europe: ‘Game only has losers’

This article was last updated on February 3, 2025

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Trade War also comes to Europe: ‘Game only has losers’

With the reaction of Mexico and Canada to the import duties of President Trump, it seems that the first steps have been taken in a trade war. The two countries come with its own tax On products from the United States.

Canada adds 25 percent, from Mexico it is not yet known how high the levy will be. China is also working on a reaction to the taxes in the US, which will start next Tuesday.

Although it is still about these three countries, the European Union is also waiting for products that are exported to the US. And that can eventually ensure that we in Europe have to pay considerably more for things we get from America.

Because this increase in rates largely ends up with the own citizen. Now that is especially the Americans, says Bert Colijn, chief economist at ING. “This is just an extra tax. Companies will for the most part pass on the extra costs to the consumer.”

Strong and competitive

Klaas Knot, economist and top man at De Nederlandsche Bank, agrees with him. “This game only has losers. The world economy has brought us a lot of prosperity, but the consumer will pay for this,” he said in the TV program Buitenhof.

No concrete taxes have yet been announced for the European Union, but according to President Trump they will arrive. How much that will be and when they would go into it is not clear.

According to Knot, Europe is prepared for any levies. “Europe is a powerful trade block with 400 million consumers. We have to make Europe strong and competitive. The largest market where we sell is Europe itself.”

Higher inflation

By imposing rates, inflation will increase again, which means that products become more expensive. That also happened in the first term of Trump. Economist Colijn: “In 2018, Trump raised the taxes on washing machines. The first three months there was no effect because there was still old stock, but then prices really rose.”

The dollar will also become stronger compared to the euro, says Knot, but that is not necessarily bad news. If Americans get more European value for their dollars, it can cause European exports to increase. It has been the case for years that Europe sells many more products to America than the other way around.

According to Colijn, that gap is difficult to reduce with import duties: the Americans simply buy a lot of things.

A hard reaction is not excluded, but nobody gets better.

Bert Colijn, Chief economist ING

The announced import duties are not new in world trade. Former President Biden also introduced several taxes, including one that led to electric cars from China becoming 100 percent more expensive. With the new levy, another 10 percent is added.

But the European Union can also do something about it. In Trump’s first term, the EU threatened with hefty taxes On American products.

The European Commission is also working on a reaction for when there are levies for Europe, thinks Colijn. It is not that far yet, Europe is still in consultation with the Americans about mutual trade. For example, the EU can buy more liquid natural gas and weapons from the Americans, so that trade is slightly more aligned. Yet Colijn does not consider a hard reaction excluded. “But nobody gets better.”

The Dutch consumer now does not notice the emerging trade war. That is only if rates are also imposed on products from the EU. If the time comes, prices will rise throughout Europe.