Trade Wars – is the EU next in line?

Attention has been focussed on the trade conflict between the US and China … though President Trump has hinted that he is considering imposing tariffs on imports of cars and vehicle parts from Europe. If imposed, European car production and exports would drop, with a knock-on effect on other sectors that rely on the car industry. As the price elasticity for cars is relatively high, European GDP growth could be 0.2-0.3% lower. Besides this direct impact, there will be an indirect impact that will hurt all countries involved in the conflict, and could potentially be around the same size as the direct impact. Considering that there will be significant damage to the US as well, it seems unlikely that these tariffs will be imposed, but President Trump might want to keep the threat alive as leverage in negotiations.