The EU is America’s biggest two-way trade partner and would be hit heavily should Trump return to the White House.Credit: AP
There would also be substantial self-inflicted pain for the US should Trump win and follow through with his threats. It would shrink the US economy, cause a blow-out in US deficits and debt, and cause inflation and interest rates to rise significantly even without retaliation from America’s trade partners. If they retaliate the impacts would be significantly greater.
Trump’s economic illiteracy – he doesn’t understand how tariffs work and are paid for – would be costly for the American households and businesses that would actually pay what’s effectively a consumption tax via higher prices. His tariffs would be extremely regressive, hitting lower-income households hardest.
The EU also, of course, has another challenge should Trump be re-elected – Ukraine.
While the EU has provided more funding to Ukraine than the US since the Russian invasion, the US has provided far more military equipment.
The EU might not be able to replace the US as a supplier of weapons and ammunition should Trump withdraw support for Ukraine, but it is trying to “Trump-proof” Ukraine as much as it can while the Biden administration remains in place.
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The G-7 has finally agreed on the details of a $US50 billion loan to Ukraine, funded by the earnings generated from $US280 billion or so of Russian central bank assets held by European clearing houses, with the US providing $US20 billion.
The EU is also trying to agree to a significant lift in defence spending along with more and longer-term financial support for Ukraine and its defence, worried that Trump might do more than just threaten to pull out of NATO this time.
For America’s two largest trading blocs and two of the world’s three major economies, the next week’s lead-up to the US election will be anxiety-inducing, as indeed it will be for the rest of a world accustomed to a largely open global trade environment.
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Source link : https://www.smh.com.au/business/the-economy/donald-trump-has-europe-and-china-in-a-panic-20241028-p5kls5.html
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Publish date : 2024-10-28 00:56:00
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