The Americans are threatening to impose high import duties on European goods on August 1. Some companies may certainly be affected by this. But the damage to the Dutch economy is likely to remain limited, economists tell NU.nl.
This is mainly because exports to the United States are not such a large part of the Dutch economy. “Trade with the rest of Europe is much more important,” says Steven Brakman, professor of international economics at the University of Groningen. “If Germany were to do something like this, we would be more affected.”
U.S. President Donald Trump announced on Saturday that he wants to levy a 30 percent tax on goods from the European Union starting in August. In most cases, this is now 10 percent. This means that from that moment on, Americans will have to pay 30 percent extra tax when they import European goods.
Possibly, the U.S. president’s threat is a way to put pressure on Brussels to reach an agreement with the U.S. on trade in goods before then. The EU and the Americans have been discussing this for several months, but no deal has been reached yet.
If that does not succeed in the coming weeks, then the 30 percent threatens. “The American tariffs are very annoying, but do not cause a recession,” says Brakman. A recession occurs when the economy shrinks for two consecutive quarters.
In case of escalation of trade war, there will be a blow
It will be different if a major trade war breaks out, in which not only the U.S. imposes high tariffs on foreign goods, but all countries concerned retaliate with similar currency. “That could really deliver a blow,” Brakman says.
The professor refers to a study by the International Monetary Fund (IMF). It investigated what would happen in such a scenario and concluded that this could cost about 7 percent of world income. “That’s like Germany and France disappearing from the world economy.”
Presumably, things will not be that bad. So far, many countries have tried not to offend the Americans with fierce counter-reactions. It is also questionable whether Trump will push through his threat of 30 percent.
In April, he already came up with import duties of 20 percent for European goods. But after a week, he lowered them to 10 percent for three months. That period expired last Wednesday, but Trump has already postponed it again to August 1.
Rabobank economist Lize Nauta also thinks that the damage from any high tariffs will remain limited. The bank calculated the consequences of Trump’s policy and expects that with tariffs of 30 percent, the economy will grow 0.2 percentage points less. “So the macro-economic impact is not too bad,” Nauta says.
Industry gets a new hit
For some sectors, the consequences could be significant. “The Dutch industry will certainly feel the pain,” Nauta says. “About 60 percent of what that sector makes goes abroad.”
The extra obstacles come at a time when the industry is already having a difficult time. This is partly due to high energy costs, staff shortages and a lot of competition from other parts of the world. Several companies have recently closed branches in our country.
In addition, the U.S. has already introduced higher tariffs on steel, aluminum and auto parts. But possibly there will soon be high tariffs on all European goods.
“The transport sector may also experience consequences from Trump’s policy,” Nauta says. “If there is less freight to transport, they have less to do. Although the major shipping companies are usually not Dutch companies.”
The tariffs can also affect the Dutch economy indirectly. In this regard, Nauta points to suppliers of auto parts. These companies often supply to German manufacturers such as BMW and Mercedes-Benz, brands that are very popular among Americans.
But if they buy fewer German cars because they have become more expensive due to the tariffs, automakers also need fewer parts. This, too, can put a brake on economic growth.
Possible dumping from China
Brakman also points to danger from another angle. “It is important to keep an eye on what China is doing. The Chinese are now finding it more difficult to sell their products in the U.S., so they want to sell more in Europe.”
That seems to be happening now. Earlier this week, figures on Chinese exports showed that in the month of June, 7.6 percent more Chinese goods came to the EU than a year earlier.
There is also concern that the Chinese want to sell extra by putting products on the European market at lower prices, the so-called dumping. Brussels has already pledged to monitor any dumping by China.