Tariffs could fracture EU-US partnership

Significance

The US administration’s announcement in March to impose tariffs on steel and aluminium imports triggered swift condemnation from Europe. Intense lobbying granted a temporary exemption to the tariffs until May. Further consultations have been launched with Washington to seek clarification over steps to secure a permanent solution.

Impacts

• US tariffs will likely divert more trade to the EU, but that will put downward pressure on prices.
• Tariffs will drive a deep wedge between Trump and establishment Republicans.
• Trump’s policy is endangering the close policy coordination and cooperation between Washington and Brussels.
• Poor transatlantic ties could make EU leaders more willing to take decisive countermeasures if Trump withdraws from the Iran nuclear deal.
• The slide of US stock futures may be a blow to Trump, who often points to stock market performance as proof of his benign economic policies.