- Isabel Schnabel of the ECB predicts a likely trade war between the USA and EU due to US protectionist policies.
- The potential trade war could reverse the benefits of globalization, leading to social and economic tensions within the EU.
The European and American economies may soon face one of their biggest challenges in recent years. With Donald Trump‘s return to the presidency, a marked shift towards protectionism in US policy appears imminent, which could have serious effects on transatlantic trade relations.
Isabel Schnabel, a prominent member of the European Central Bank (ECB) Executive Board, recently expressed serious concerns about the future economic relationships between the European Union and the United States.
Anticipated Increase in Trade Barriers
According to Schnabel, it is
“very likely”
that the USA and EU will enter into a trade war. The Trump administration plans to implement high tariffs on imports, which has already caused considerable concern.
Such measures could particularly affect Germany, which records the largest trade surplus within the Eurozone against the USA.
The forthcoming tariffs considered by the American government could have far-reaching consequences, from increasing the prices of imported goods to threatening the purchasing power of European households.
A trade war would not only lead to higher costs for imported goods but also slow economic growth, restrain investments, and dampen consumption.
These factors are crucial for the recovery of the European economy, which is already under a strained economic situation. The looming trade barriers would not only strain economic relationships but could also have long-lasting geopolitical impacts by questioning strategic alliances within Europe and beyond.
Schnabel emphasizes the need for the EU to possibly reassess its economic policy and take measures that could counteract US policy.
The European Central Bank maintains its target of a 2% inflation rate, despite the challenges posed by US protectionist tendencies. The ECB has already lowered interest rates in response to economic uncertainty to cushion the economic shocks.
At this critical juncture, Europe’s strategic autonomy is of paramount importance. The EU might be forced to rethink its dependency on external economic partners and strengthen its own economic and political resilience.
The decisions made in the coming months will not only shape Europe‘s economic landscape but also global economic relationships and the principles of international cooperation that have underpinned transatlantic relations for decades.