It has been clear this week that Donald Trump has returned with some gusto to his tariff agenda. Having had to retreat after so-called Liberation Day in early April, he is again spraying around threats of higher tariffs on imports from US trading partners. It remains to be seen which of this are implemented and for how long. But the potential damage to the international economy – and to the US itself – is significant.
While Trump had to row back on his initial menu of tariffs, it is worth noting that significant new charges were still introduced. The US has imposed an additional 10 per recent tariff on most imports and higher charges on steel, aluminium and cars. It has now upped the ante with one of its major trade partners, Canada and has threatened another, Brazil, with 50 per cent tariffs, largely on political grounds.
As has happened a few times in recent months, some of these threats may never turn into action. But they continue to create uncertainty and risk for the world economy.
Trump’s renewed focus on tariffs has provided a difficult backdrop for attempts to reach an outline agreement between the EU and the US, which would provide the basis for future talks. It would also, for now at least, remove the threat of a wider transatlantic trade war.
RM Block
Reports suggest that the basis of such an agreement has been worked out, meaning the next few days will be important. EU foreign ministers are due to discuss the issue on Monday. One decision that faces them is whether to delay an EU retaliation package for the first set of Trump tariffs on steel and aluminium. If, by Monday, a deal is still on the cards, they will no doubt do this. But both sides will know that EU retaliation cannot be delayed forever – and the risk is that if this happens then the risk of a trade war increases.
If a deal is agreed by the European Commission with Washington it will be interesting to see the reaction in national capitals. While the commission will have kept in touch them all along, some controversial topics seem to be in the mix – such as the US call for higher tariffs on EU food products. It also remains to be seen what happens with cars, an issue of vital interest to Germany.
For Ireland there are a few areas of key importance. One is trying to avoid a full-scale trade war. The second is the general level of tariffs which will apply to EU imports to the US. The third are sectoral issues and in particular what happens to food products and drinks. And the fourth is whether the agreement says anything about the pharma sector, the subject of a separate process based on a report being completed for the US president.
So there is a lot at stake here for Ireland in the short-term, as well as longer-term concerns. The uncertainty will roll on for many months yet, but we should get some important pointers in the days to come.
